APRA hits out at super trustee failings
Super trustees are failing to provide the Australian Prudential Regulation Authority (APRA) with sufficient data to meet regulatory requirements, the regulator has said.
In a speech to the Australian Institute Superannuation Trustees (AIST), Helen Rowell, deputy chair of APRA, said the regulator was concerned about trustees merely completing a ‘tick in a box’ exercise.
Referencing Prudential Standard SPS 515 Strategic Planning and Member Outcomes which came into force on 1 January, Rowell said, while industry practice was evolving, she expected a “reasonable effort” to be made by trustees to meet their requirements.
SPS 515 required a superannuation entity to regularly assess the outcomes provided to members and identify opportunities for improving them, supported by strategic and business planning. This was carried out by considering questions such as board strategy, financial projections, business models, stress testing and member outcomes.
“We are concerned that some trustees are approaching implementation of SPS 515 as a ‘tick in a box’ compliance exercise and may not be planning appropriately for the future,” she said.
“This has become clear through the varied quality of documentation provided to us, either as part of the APRA Business Performance Review (BPR) or through trial outcomes assessments that we have been encouraging trustees to undertake over the past year.”
Examples of poor practice by trustees included narrow selection of peer groups for comparison and benchmarking, failure to specify why certain peer groups had been selected, poor documentation of a methodology, ‘unambitious goals’, ‘questionable benchmarks’ and inadequate outcome assessments.
She said: “In particular, we observed that:
- When it came to the options, benefits and facilities provided, there was not always a clear link to the financial interests of members and it wasn’t evident that the trustee had determined the impact of the cost of these services on the financial interests of members;
- Some trustees appeared not to have, or there was no evidence they had, considered the appropriateness of the insurance strategy nor whether insurance fees charged in relation to the product inappropriately erode the retirement income of those beneficiaries; and
- In assessing the impact of fees on the members invested in the relevant product, several trustees didn’t appear to have considered the appropriateness of their fee structures, including the way they split fees between flat and variable charges”.
It was not all bad news as she also said APRA had seen better examples including clear and well-structured assessments and methodologies, assessments supported by a range of metrics and consideration of the outcomes assessments’ publication strategy.
Trustees could expect to receive further engagement from APRA in advance of the 31 December BPR deadline and the 28 February deadline for the first outcome assessment.
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