The Association of Superannuation Funds of Australia (ASFA) has told the Australian Prudential Regulation Authority (APRA) it has concerns about a new prudential practice guide that suggests in-house superannuation administration carries greater risk than outsourcing.
In a submission to APRA, ASFA refers to the draft prudential practice guide and its suggestion that because of the higher operational risks associated with in-house administration, funds would need to maintain higher levels of liquid assets.
It said it had concerns that, in some instances, the potential failure of an outsourced provider and/or increases in fees due to systems upgrades might place a greater risk on trustees.
The submission said this was particularly the case with respect to smaller funds that lacked bargaining power with administrators.
The ASFA submission said it would be helpful if the regulator could provide background on the reasoning for its decisions and, in particular, the risk analysis that had been undertaken.
The submission also queried a further paragraph within the APRA guide that it said articulates the concept that material business activities performed in-house pose a greater risk to trustees than outsourced activities in all instances.
