APRA announces new measures to strengthen member outcomes

APRA has announced plans to strengthen guidance for trustees to enhance member outcomes for superannuation. 

The prudential regulator is updating Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) in areas such as trustee expenditure of member funds, management of financial resources and transfer of members in and out of funds. 

This follows a discussion paper issued in 2022 and findings from thematic reviews. 

It has also decided to retire guidance on the sole purpose test and has no plans to issue new guidance. This decision was taken as trustees are “operating more mature businesses today and are well placed to make decisions consistent with their legislative duties,” APRA said.

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APRA’s proposed reforms to SPS 515 aim to:

• Ensure expenditure requirements better align with the best financial interest duty and, for the retirement phase, to support the retirement income covenant. Under the reforms, trustees must be able to justify the purpose of expenditure relating to business operations.
• Lift the bar on trustees’ management of financial resources. The draft SPS 515 seeks to ensure trustees maintain a prudent approach in areas such as fee setting and managing member-funded reserves.
• Improve management of risks to members being transferred across funds. RSE licensees need to be prepared to act promptly so members are not disadvantaged if expected outcomes are not achieved. The proposed changes would ensure RSE licensees have a clear picture of when they need to act and what steps they need to take to minimise negative impacts on members.

In light of the joint review by APRA and ASIC into implementation of the Retirement Income Covenant, APRA proposes to embed review findings into the SPS 515 framework to ensure an appropriate focus is placed on the needs of retired members and members approaching retirement.

The updates include amendments to SPS 515 to require an RSE licensee to consider the retirement income strategy when developing strategic objectives.

Deputy chair, Margaret Cole, said: “SPS 515 goes to the heart of what trustees need to do. Updating the standard will ensure trustees have robust business operations and are held to account to deliver outcomes that are in the best financial interests of their members.”

APRA has invited written submissions to the draft SPS 515 which should be submitted by 21 December 2023 with the regulator intending to finalise the framework in H1 2024 for implementation from 1 January 2025.