APRA tells super funds - shape up or ship out
The Australian Prudential Regulation Authority (APRA) has laid down the law to under-performing superannuation funds stating that an analysis of its data had identified funds which had consistently underperformed and were unlikely to adequately perform.
The regulator has written a letter to all superannuation under its jurisdiction bluntly stating that its recent assessment of their performance had identified funds “which, in APRA’s view, appear not to have consistently delivered quality member outcomes in the recent past, may be unlikely to deliver quality member outcomes in the future and/or may not be sustainable into the future”.
What is more, APRA has warned the funds that those who have been identified as current and future under-performers will be summoned before the regulator with their boards being obliged to explain how they are going to improve the situation.
The letter, signed off by APRA deputy chair, Helen Rowell stated that, generally, the superannuation funds that APRA had identified as having concerns in respect of quality member outcomes and future prospects were those “that have performed poorly on an absolute and relative basis on a majority of the quantifiable metrics”.
“In APRA’s experience, [responsible superannuation entity] RSE licensees of these RSEs can also have inadequate strategic and business planning practices, governance and/or risk management frameworks to address the risks arising from poor performance,” she said. “APRA will review its assessment of RSE licensees and their RSEs regularly.”
Rowell’s letter represents the first formal warning to funds about the regulators intention with respect to the application of its so-called “member outcomes test” with the deputy chairman and other senior APRA executives having previously pointed to the likelihood of further mergers activity and superannuation fund exits.
Her letter finished on the note: “APRA will soon write to each of the RSE licensees of RSEs identified as a result of APRA’s assessment to request their respective Boards to meet with APRA to discuss our assessment. These RSE licensees will be required to develop a robust and implementable strategy to address identified weaknesses within a reasonably short period and to engage more regularly with APRA to monitor the implementation of that strategy.”
“Where it is clear that a particular product or RSE is unlikely to be able to continue to operate in the best interests of its members, APRA expects the relevant RSE licensee to act to ensure a timely and well-managed transfer of members to another suitable product or RSE, either within the RSE licensee’s own operations or those of another RSE licensee.”
Recommended for you
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
Morningstar is going to offer research ratings of funds in the $3.5 trillion superannuation sector for the first time in response to demand from financial advisers.
Treasurer Jim Chalmers has opened a consultation into the design of the annual superannuation performance test, canvassing views on a range of reform options.
