APRA tells super funds - prove value for money

Superannuation funds have been reminded that they need to demonstrate to members the value for money they generate from activities such as marketing or sponsorship, particularly where related parties are involved.

Australian Prudential Regulation Authority (APRA) deputy chair, Helen Rowell, has used an address to a banking and finance conference to state that while there had been few "egregious lapses" in governance by superannuation trustees, issues existed with respect to smaller shortcomings.

"We have been fortunate that, given the size, complexity and diversity of the industry, examples of really egregious lapses in governance by superannuation trustees have been relatively few (although I'm sure we can all think of some examples)," she said. "What is perhaps less obvious is the impact, when considered together, that a series of decisions that evidence poor governance practices can have on the outcomes for members over time. "

Rowell said examples of these types of decisions might include arrangements for insurance or administration — particularly with related parties - that were entered into without adequate benchmarking of the terms and conditions against alternative providers.

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She also nominated "sponsorship, marketing or other payments for services (such as some of those highlighted by the Trade Union Royal Commission) where the value for money or underlying benefit for members has not been adequately demonstrated and the governance and oversight in relation to those payments is weak".

Rowell said APRA's thematic review of related party arrangements emphasised the importance of appropriate governance practices for, and ongoing oversight and monitoring of, all related party arrangements to ensure that member best interest obligations were being met.

Industry fund television advertising campaigns and sporting sponsorships have been the frequent subject of criticism by financial advisers and other groups.