The Australian Prudential Regulation Authority (APRA) expects to be able to reduce frontline supervision in the superannuation industry from 2008-09 — something that is likely to flow through to the level of levies imposed on funds.
The expected reduction in supervision, revealed in a discussion paper this week, is expected to flow from the significant decline in the number of superannuation trustee entities as a result of the trustee licensing process, which was completed last year.
“With the decline in the number of trustees, it is reasonable to expect that, over time, APRA will need fewer frontline resources devoted to the supervision of superannuation,” the discussion paper said. “As entities bed down risk management systems and processes developed during the licensing period and APRA gains greater confidence that the licensing regime has achieved the desired outcomes, supervision intensity should reduce.”
It said that over the next 18 months, APRA would be examining the implementation by trustees and entities of their systems.
“Assuming the existing benign investment environment continues and there is an absence of major compliance problems, APRA expects to be able to reduce frontline supervision in superannuation from 2008-09,” the discussion paper said.
The discussion paper acknowledged that the high level of activity surrounding trustee licensing had led to an increase in superannuation levies in 2006-07, and that this was not expected to reduce in 2007-08.
“However, assuming that the investment market remains benign and that trustees continue to meet the necessary minimum standards, it is reasonable to expect that cost savings should appear from 2008-09, as the additional costs from earlier years are removed from the averaging process,” it said.
