Warning that APRA test could send super funds to wall

The Australian Prudential Regulation Authority (APRA) could effectively send superannuation funds to the wall through clumsy use of annual performance tests. 

That is the warning delivered to the Senate Standing Committee on Economics, with the National Foundation for Australian Women warning that the test envisaged in the Government’s Your Future, Your Super legislation could make the failure of superannuation funds a “self-fulfilling prophecy”. 

The submission said the difficulty with the Government’s proposal was that it depended on the parameters established in the test, which was to be administered by APRA. 

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“APRA will have flexibility in how the test is designed and applied. There is some scrutiny provided through the requirement that regulations must be tabled in Parliament.  

“The regulations are expected to address the following matters: 

  • · specifying requirements in respect of investment returns (which may be net of fees and taxes); and  
  • · specifying requirements that depend on the exercise of a discretion by APRA; and 
  • · specifying matters that APRA may or must take into account in exercising such a discretion; and 
  • · allowing APRA to make specified assumptions in exercising such a discretion.” 

“Failing this test will have major implications for a superannuation fund, as it will lead to members leaving that fund. The transfer of member accounts to other funds will further weaken the viability of the original superannuation fund: for example the fund may find it necessary to retain higher levels of cash holdings, which will contribute to a weak result in the subsequent year; rendering it unable to accept new members to rebuild its investment base,” the submission said. 

“In short, a failure to meet benchmarks in one year could become a self-fulfilling prophesy with the fund continuing to perform badly until it fails. The outcome would be even more catastrophic for remaining members than the original underperformance. While well intentioned, the outcome of this measure will reduce competition and diversity in MySuper funds and other nominated products.” 




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IMO it is long overdue for Super funds to be held to account. They have had free rein, minimal accountability. The high returns they post are usually mathematical jugglery (since they hold vast portfolios of unlisted properties) rather than actual growth. They got caught out when they had to pay the $10K early release during the China/Covid pandemic - to have big funds like REST/Hostplus asking for liquidity only confirmed that they had made illiquid investments.
Placing 80-90% of 'balanced' portfolios in growth assets (read illiquid investments), masks what average Joe/Jane Bloggs actually thinks is being done with his/her money.
The very fact that APRA is even looking at these areas will compel them to act with greater sobriety.
Cheers to APRA !!

I guess they better start performing then... although in reality, they will probably just learn to juggle returns better across different reporting periods. :P

About time these Industry Funds were scrutinized. We have so many regulatory bodies and when you have a problem with an Industry Fund, which only has it's own left wing ideology as a guide, there is no one body you can go to and have the problem/conflict examined and get a solution. The only way is Court. And yet Superannuation is not covered by a Will and therefore that should mean that to contest the decision of a Trustee should not involve a Court. Contesting the nominated beneficiary of a Superannuation fund account is so much easier than to contest the beneficiary of a Will. Therefore when a death occurs others, not nominated beneficiaries, find it easier to contest the superannuation component than to contest assets left in a Will. This leaves the nominated beneficiary relying on someone called a Trustee to make the final decision on the maybe largest component of a deceased's assets. No lawyer/law experience necessary just S.I.S. legislation which is flawed for the average person these days who can have short term relationships, no children, and live together with no commitment to any long term prospects. The Trustee of REST told me he 'thought it was fair' to divide my son's super and death benefit between a girl who my son knew for 2 yrs or less, and the nominated beneficiaries, his parents, who had cared for, loved and provided for him, for him 32 yrs. I went to ASIC ( helpful, nice, was given advice), APRA (helpful, nice, given advice), AFCA (twice, nice). The 2nd time with AFCA , after about 1 month of phone calls, interviews etc I was told as a beneficiary I didn't have the right to dispute. Only the person who organized probate could dispute the decision of the REST Trustee with AFCA. Why probate when Super has nothing to do with a Will???Australians you need to all wake up to Super and these bodies who are supposedly set up, pay hundreds of thousands of dollars to CEO's, Boards etc and have no teeth to fix anything. They are set up to create employment and to give you, the taxpayer contributing to these funds, the false impression that you have someone in yr corner when you feel you have been short changed by the Superannuation Industry. You have no-one in yr corner. You are alone to fight these immoral Funds who take yr money, don't tell you the truth by omitting to tell you that they will decide where yr money goes, have such a complicated system, and let you think that because you put yr money in their fund they care about you. They are ruthless, callous and uncaring when, at the worst time in yr life when yr child dies, they sink the boots in. APRA should be making superannuation voluntary. Where in our Constitution is there provision for a Government to say each worker in this country must put x% of his pay every week into a particular fund?? And someone with no legal experience, after lying to you, can give yr money to someone else? It's a rort of the most extreme kind and it must stop.

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