APRA has moved ahead of the Parliament in introducing an outcomes test for large superannuation funds.
APRA released a package of new and enhanced prudential requirements, which it says are designed to focus large super funds trustees on delivering quality outcomes for members.
APRA Deputy Chairman Helen Rowell said the regulator was committed to lifting standards in the superannuation industry, to the benefit of members.
“As the prudential regulator, APRA’s primary focus is on the sound and prudent management of the $1.8 trillion APRA-regulated segment of the superannuation industry; that includes seeking to ensure that RSE [Registrable Superannuation Entity] licensees meet their obligations to put their members’ interests first,” Mrs Rowell said.
“These changes to the prudential framework set a higher bar for RSE licensees by requiring a robust assessment of the outcomes delivered for members to be reflected in their strategic and business planning.”
The new framework includes an outcomes assessment, requiring RSEs to annually benchmark and evaluate their performance in delivering “sound, value-for-money outcomes to all members”.
This outcomes assessment is similar to a measure in a Bill before Parliament. The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Bill 2017, would introduced a legislated outcomes test. However it appears stalled in the Senate, having last been debated in December 2017.
APRA says its proposals are consistent with the Bill, and it is moving now to “maintain industry momentum towards delivering improved outcomes for members”. APRA says it will review if changes to its prudential framework are require should the Bill pass.
APRA’s framework will apply to both MySuper and Choice super fund products. The Government’s Bill was originally only going to apply an outcomes test to MySuper products. However Assistant Treasurer Stuart Robert announced the Government would move to amend the Bill to also apply it to Choice products.
Mrs Rowell said that APRA has strong support for the other reforms in the Bill – which includes new powers for APRA, such as directions powers, MySuper authorisation and cancellation provisions and requiring APRA to approve changes to the ownership of RSE licensees.
“These new policy proposals address weaknesses in the current superannuation regulatory framework and would greatly assist APRA in driving the superannuation industry towards addressing underperformance and improving member outcomes,” she said.
Beyond the outcomes assessment, APRA’s package requires RSEs to meet requirements for strategic and business planning – including management and oversight of expenditure and reserves.
APRA has set a start date for the new measures at 1 January 2020, “to provide industry with sufficient time to meet the new requirements”. Details can be found in Prudential Standard SPS 515 Strategic Planning and Member Outcomes.