APRA to target poor performing super funds in prudential changes

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APRA will be targeting poor performing superannuation funds in upcoming changes to prudential regulation.

APRA Deputy Chairman Helen Rowell told the 2017 ASFA Conference that the regulator would soon be releasing for consultation a package of proposed prudential framework revisions, including “changes to promote greater transparency, especially around expenditure, and implement member outcomes assessments for all funds.”

“The changes proposed in our upcoming consultation package are designed to put pressure on poor performers – irrespective of industry segment – to lift their game or, if the needed improvement is not possible within a reasonable timeframe, to gracefully exit the industry,” Rowell told the conference.

Rowell stressed that these proposed changes “complement, but are largely separate from, the Government’s proposed reforms”.

“We see these changes to the superannuation prudential framework as essential in light of the challenges the sector faces, to ensure that standards of practice across the industry are lifted and the best interests of all super beneficiaries are adequately protected.”

Rowell took aim at the disclosure and comparability of superannuation products.

“Weaknesses in the current reporting and disclosure framework for super make it difficult for regulators, industry and members of the public to meaningfully compare outcomes across funds, and the many products and investment options they offer.”

“Enhancements to the reporting regime, which we will explore through our consultation package, seek to provide more detailed and comparable superannuation data for APRA to analyse and publish. This is expected to enable industry stakeholders to better assess the outcomes being delivered, and ultimately drive improvements in these outcomes and promote increased competition.

Rowell said that super funds trustees confident in the outcomes they are providing for members should welcome this increased transparency.

Overly abundant choice in super fund investment continues to be a concern for APRA.

“It seems legitimate to ask why the industry offers members an average of nearly 200 investment options when many funds have a significant proportion of members in their default MySuper products and hence relatively few members in each of the many choice investment options on offer,” said Rowell.

“And that is particularly the case when many of the options don’t appear to be markedly different in their asset allocation or risk/return characteristics.”

“Under APRA’s proposed member outcomes assessment, and as part of sound strategic and business planning, we would expect trustees to seriously consider the optimal number of investment options they should be providing to efficiently deliver quality outcomes for members.”

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