A growing number of superannuation funds are establishing reserves to cater for operational risks such as fraud, pricing errors and system failure, a Mercer survey has found.
An operational risk reserve allows superannuation funds quick access to money in order to compensate members should the fund face an operational risk.
The survey of 34 funds from the not-for-profit sector found the level of reserves held by funds were between 0.2 per cent and 0.6 per cent of assets or liabilities.
Mercer found that current levels of reserves should be higher.
The global consultant recommended that a reserve be 1.25 times the cost of a fund's annual operations, plus an extra reserve for the provision of services from an outsourced provider.
Mercer also found a gap between smaller and larger funds, with some smaller funds less likely to hold such a reserve.
"A head in the sand attitude is not appropriate," Mercer worldwide partner David Knox said.
"All superannuation funds, particularly in the industry funds and not-for-profit sectors, should establish an operational risk reserve. After all, these types of events could hit any fund in the future."
However, a lack of regulatory obligation for funds to set up such reserves has provided little guidance to the issue, Knox said.
