investor daily logo

Despite consolidation, super industry still a ‘fair distance’ away from optimal size

3 minute read

APRA has shared its view on the ideal size of the superannuation industry.

APRA chair Margaret Cole has indicated that Australia’s superannuation industry is still some way away from reaching its optimal size despite recent consolidation.

Ms Cole told the Financial Services Council policy briefing that 10 of the 13 super funds that failed APRA’s inaugural performance last year had now merged or exited the industry.

“With the industry still at 145 APRA-regulated funds, of which 105 collectively manage less than 9 per cent of assets, I can say that it is our view that the optimal size of the industry remains a fair distance from where we are now,” she said.

On whether APRA had a specific figure in mind for the ideal number of funds, Ms Cole indicated that this was not the case.

However, she pointed to comments from outgoing APRA chair Wayne Byres, who recently stated: “It’s fair to say, that if you were designing the superannuation industry from scratch, you wouldn’t give it the shape we have today”.

The prudential regulator is currently finalising work on its second performance test, which could see some funds closing to new members if they fail for a second time. 

Meanwhile, APRA will release its latest corporate plan in the next week, which Ms Cole said would send a clear signal that the regulator’s focus and agenda remained undiverted.

“We will continue to push trustees to rectify sub-standard practices through robust supervision, strengthening prudential standards and reinforcing minimum expectations in areas including investment governance, successor fund transfers, financial resilience and ensuring trustees are undertaking expenditure in the best financial interests of their members,” she said.

“You can expect our push to eradicate unacceptable product performance to continue by intensifying pressure on trustees to cease offering high-fee, poor-performing products, and through further scrutiny of the choice sector.”

Ms Cole added that, even during recent challenges, Australians had been able to rely on banks, insurers and super funds to deliver the essential services that they need.

“A stable, resilient and operationally sound financial system is essential to Australians’ quality of life and preserving it lies at the heart of APRA’s mission,” she concluded.

APRA also recently announced it is seeking to make changes to its standard governing strategic planning and member outcomes in superannuation.

The regulator proposed a number of changes to Prudential Standard SPS 515 Strategic Planning and Member Outcomes, including strengthening requirements to ensure that trustees deliver quality outcomes to all cohorts of members in a more measurable way.