The Australian Prudential Regulation Authority (APRA) has vowed to continue to pursue “transformation through action” in the superannuation industry over the coming year, but the regulator has reminded funds that they are responsible for the outcomes of their members.
Speaking at the Conexus Financial Superannuation Chair Forum on Monday, APRA deputy chair Margaret Cole said that the regulator will continue to build on the foundations it has set, focusing on improvements that need to be made to drive better outcomes for the community.
“But let’s be clear, responsibility for outcomes for members of superannuation funds rests with you. We may referee the game, but we don’t play it,” she stated.
Ms Cole said that rectifying substandard industry practices will remain a key priority for APRA.
She noted that it has been just over a year since the prudential regulator called on trustees to address the risks and vulnerabilities identified as part of its thematic reviews into strategic planning and member outcomes, fund expenditure and unlisted asset valuation practices.
“Our supervisors will continue this focus this year, and APRA will also assess the preparedness of trustees to respond to investment market stresses, including possible liquidity stresses,” Ms Cole said.
“We will continue our scrutiny of business models that are challenged in delivering long-term, sustainable, competitive outcomes for members.”
According to Ms Cole, APRA’s annual Your Future, Your Super performance test has proven itself to be a valuable tool in identifying underperformance and encouraging super trustees with failed products to address their underperformance or exit.
“We all know that the government’s review into the Your Future, Your Super reforms is yet to conclude. But we encourage trustees not to delay examining the performance of all their products as well as the fees that are charged,” she said.
“Regardless of the outcomes from the review, performance and sustainability will remain a key focus of our supervisory work, so don’t sit back and wait.”
Retirement income was also identified as a significant priority for APRA this year, following on from the retirement income covenant coming into effect in July last year.
“As foreshadowed in our March 2022 joint communication with ASIC, APRA is considering how the prudential framework might be adjusted to ensure trustees are focused on improving retirement outcomes for their members and are managing new risks that arise,” Ms Cole said.
“APRA and ASIC are currently undertaking a thematic review to examine how a sample of trustees have implemented the retirement income covenant within their business strategies and operations for the benefit of members.”
Additionally, Ms Cole indicated that one of APRA’s biggest policy priorities for super this year is to improve member outcomes more broadly through updates to Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515).
“APRA will continue to strengthen the resilience and prudential management of the superannuation industry, ensure a stable financial system and work to protect the financial interests of fund members,” she said.
“Ultimately, though, the success of your fund is in your hands. Don’t wait for APRA to blow the referee whistle. When it comes to delivering the best outcomes for your members, you know best what needs to be done.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.