Thirteen superannuation funds have accepted they can’t cut the mustard under the Australian Prudential Regulation Authority’s (APRA’s) member outcomes arrangements and are exiting the industry.
APRA chairman, Wayne Byres has told the Senate Economics Committee that the regulator had identified an initial group of 28 funds which it believed where delivering poor outcomes for members “across a range of dimensions”.
He said the trustees of those funds were challenged by APRA to justify how they were delivering value for members.
“Of these, 13 have looked at the evidence and have exited or are exiting the industry, and another seven have changed product pricing or fees in some way to make their offerings more competitive,” Byres said.
He said that, of the remainder, five were deemed on further exploration to have better performance than first appeared, and actions in relation to the other three were expected to be agreed shortly.
The APRA chairman told the committee that further consolidation in the industry was likely as a result of the regulator’s action.
“It is difficult to argue that Australia needs as many as 200 superannuation funds or 40,000 plus investment options. But that well-worn adage remains true: past performance is not necessarily a good guide to future performance,” Byres said. “We also need to ensure that new competitors to the marketplace, who will inevitably start without a track record and potentially high costs until they can generate scale, are not prohibited from entering the system.”
He said that, for these reasons, APRA continued to advocate an approach that looked at performance of trustees across a number of dimensions, and did not rely solely on measures of historical returns over a particular time horizon as the only determinant of success or otherwise.