In his last official speech as APRA chair, Wayne Byres, reflected on the superannuation sector noting that what has been the most important and impactful of all the changes is the increased transparency that has been forced upon the industry.
“Given the weak accountability that most superannuation trustees are subject to by virtue of their ownership structure and limited member engagement, corporate interest and self-interest can sometimes outweigh member interest. Transparency has been key to increasing the discipline on trustees to ensure they are always managing members’ money in their [members’] best interests,” Mr Byres said.
“In saying that, I am not suggesting every single thing about a fund’s operations must become public. Clearly, there will be commercially sensitive information that could disadvantage a fund’s members were it to be disclosed. And pumping out reams of raw data is not going to be helpful. Information must be disclosed in a manner that is digestible and informative if it is to be useful,” the chair explained.
Mr Byres applauded the “significant strides” made by APRA in recent years, including the introduction of heatmaps and the addition of the statutory performance test.
“That is important because, given a blank sheet of paper, you would not give the superannuation industry the shape it has today,” he said.
He noted, however, that more needs to be done given that, “in an industry where size matters”, there is still a long tail of smaller funds whose longevity is challenged.
“This generates inefficiencies in the system, the cost of which is ultimately borne by members,” Mr Byres said.
In making this point, however, he noted “it is not simply a case of ‘big is good, small is bad’.”
“Our heatmaps identify large funds that must do better, and small funds that are delivering well for their members.
“But, overall, the evidence is clear that size helps deliver better member outcomes. Trustees that cannot compete on that basis need to think very hard about how (and whether) they can deliver in their members’ best financial interests, now and into the future. The spotlight on them will only get brighter and more intense,” Mr Byres said.
Mr Byres became chair at a time when the Stronger Super reforms were just settling in.
“Stronger Super brought MySuper into being and was followed by reforms such as the Protecting Your Super and Your Future, Your Super packages. And of course, there were important inquiries, such as the Productivity Commission and the Hayne Royal Commission,” he recounted.
He said that he strongly believes that much of that scrutiny and change has been necessary to produce a better superannuation system for Australians.
“By and large it has. There is more to do, but the reforms have undoubtedly driven the industry in the right direction.”
Back in July, Mr Byres announced that he would step down as chair on 30 October.
In a statement released at the time, Mr Byres said he was honoured and privileged to have held the role and that he was pleased with what the prudential regulator had achieved during his eight-year tenure.
“There is always more to do, but the financial system is stable, APRA’s leadership team is strong, and the organisation and its people are well placed to continue to manage future challenges,” he said.
Also at the time, the Treasurer confirmed that the federal government would undertake an “open and transparent process” to select the next APRA chair.
