APRA proposes super fund regulation changes, “independent” of Government

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APRA is consulting on changes to prudential regulation of large superannuation funds, proposals which it says are independent but aligned with changes put forward by the Government.

“The package outlines proposed changes to the prudential framework designed to enhance strategic and business planning, oversight of fund expenditure and the assessment of outcomes for members of registrable superannuation entities (RSEs),” said APRA.

“This is the second stage of an extensive consultation process, which commenced in August with the release of a letter to industry outlining APRA’s intentions, followed by several roundtable discussions with key industry stakeholders.”

Deputy APRA Chairman Helen Rowell said that the regulator wants to ensure all large super funds were prepared to manage emerging challenges, including changing member demographics and an increasing competition.

“Every super fund member deserves confidence their fund is delivering quality, value-for-money outcomes. APRA’s proposals, supported by our ongoing supervisory focus, will help RSE licensees lift their standards for the long-term benefit of their members,” Mrs Rowell said.

“They also reflect APRA’s ongoing efforts to encourage all RSE licensees to go beyond the minimum legislative requirements by conducting a broader outcomes assessment as part of their strategic and business planning processes.”

The proposed measures include a new standard “requiring all RSE licensees to annually assess the outcomes provided to members using a broader range of measures” and a requirement on APRA-regulated funds to provide “straight-forward” processes to opt-out of all insurance.

Expenditure, including payments to related parties, is another area that APRA says needs improvement. The regulator proposes that funds have an “expenditure policy that supports rigorous decision-making, monitoring and oversight of expenditure decisions and demonstrates how expenditure is linked to the delivery of cost-effective, sound outcomes”.

APRA says its proposals are “independent of, but aligned with, legislative proposals currently before the Parliament”. The Government didn’t have the votes to pass its governance and reporting changes in the latest sitting of Parliament.

“In considering the final form of the standards being issued for consultation today, APRA will have regard to both feedback from consultation on its own proposals and the final form of any new legislation passed by the Parliament,” said APRA.

The regulator expects to release the revised prudential measures in mid-2018, with a proposed commencement date of 1 January 2019.

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