APRA has called on super trustees to close widening performance gaps as superannuation becomes more critical to financial stability.
APRA chair John Lonsdale has warned that the growing systemic importance of superannuation demands stronger governance and sharper focus on retirement outcomes, as new system-wide risks begin to build.
Appearing before a parliamentary committee, Lonsdale said Australia’s financial system “remains strong and stable with robust levels of financial and operational resilience”, supported by long-standing prudential policy settings across banks, insurers and superannuation funds.
But he cautioned that “we cannot afford to be complacent, especially at a time of heightened global uncertainty”.
Lonsdale highlighted APRA’s new System Risk Outlook report, which identifies three major sources of vulnerability: geopolitical tensions, housing risks and interconnectivity across the system — including the expanding influence of superannuation.
He said geopolitical risk has the potential “to transmit through the financial system via many channels and trigger multiple disruptive risk events at the same time”.
APRA and the Council of Financial Regulators (CFR) have jointly established a dedicated work program to strengthen resilience in response.
Housing-related vulnerabilities were the second concern, with high household debt and a pick-up in investor lending prompting APRA’s recent pre-emptive move to activate limits on high debt-to-income home lending from February.
“We are not prepared to wait for risks to continue building before putting appropriate guardrails in place,” Lonsdale said.
However, it was the third theme — superannuation’s growing systemic weight — that carried the strongest message for trustees.
Lonsdale said the inaugural system risk stress test showed superannuation “can act as a stabilising force for the financial system, providing capital support to the banking system, but in some circumstances can amplify vulnerabilities”.
APRA will shortly begin Phase 2 of the test to deepen its understanding of how shocks can spread between banking and superannuation.
He reinforced that the sector’s purpose is clear: “so Australians can save for retirement and live with dignity once they’ve stopped working”.
For that reason, APRA is intensifying scrutiny of trustee decision-making and member outcomes.
Last week, APRA and ASIC released the 2025 Retirement Income Covenant Pulse Check, which revealed “a growing gap between the trustees actively promoting better retirement outcomes for their members and those that are not”.
Lonsdale said APRA will engage directly with lagging trustees and support ASIC’s calls for improvement.
He also referenced the collapse of managed investment schemes First Guardian and Shield, which affected thousands of investors. While APRA does not regulate such schemes, it oversees the platform trustees that made them available.
APRA has been reviewing onboarding, due diligence and monitoring practices, and recently wrote to trustees urging them to “accelerate and escalate efforts” to safeguard members’ platform investments. Enforcement tools will be used “as appropriate”.
Lonsdale also addressed APRA’s efforts to “get the balance right” between safety, competition and efficiency.
After industry feedback, APRA will adjust parts of its proposed governance reforms, including extending non-executive director tenure limits from 10 to 12 years and scrapping early-engagement requirements on responsible person appointments.
Further consultations are underway to modernise banking standards and introduce more proportionality, while insurance reviews aim to broaden reinsurance access and support capital frameworks for longevity products such as annuities.
“As the system evolves, our framework must evolve with it,” Lonsdale said, emphasising that prudential settings must continue to protect members’ retirement savings while supporting an efficient and competitive superannuation sector.
