Super funds worried about being hamstrung on salary packaging

Superannuation funds are complaining that they will be hamstrung in seeking to recruit investment talent because of a remuneration regime being proposed by the Australian Prudential Regulation Authority (APRA).

The regulator has been warned that if superannuation funds have to be held accountable around performance incentives within variable remuneration packages, then they will find themselves at a distinct disadvantage to private equity funds and others who are not subject to APRA oversight.

In a submission filed with APRA, the Association of Superannuation Funds of Australia (ASFA) in response to the regulator’s Revised Draft Prudential Standard CPS 511 Remuneration, the industry organisation called for greater clarity from the regulator about accountability around non-variable remuneration.

“CPS 511 continues to indicate that variable remuneration is an accountability component for an organisation, implying that it might be required for RSE licensees to ensure that appropriate incentives are set for employees,” it said. “Not all RSE licensees have variable remuneration. The choice of having (or not) variable remuneration is made by each RSE licensee based on their individual circumstances. ASFA considers that APRA should be absolutely clear that variable remuneration is not an accountability requirement.”

 “Overall, ASFA continues to be concerned about the ability of [superannuation] RSE licensees to compete for talent with other financial services industry participants (for example, private equity funds), as well as participants in other industries,” ASFA said.

“There are many other industries that are not regulated by APRA and therefore would not need to follow CPS 511, particularly with regard to the composition of their variable remuneration.”

“For example, an investment management professional might have a choice between doing essentially the same job at a superannuation fund, where their variable remuneration will be partly deferred under CPS 511, or at a fund manager where their variable remuneration will be paid in full upon vesting,” the submission said.