Super trustees to remain under APRA spotlight

Outlining its key priorities for the new year, the Australian Prudential Regulation Authority (APRA) has said it will maintain its focus on holding superannuation trustees to account to address any deficiencies and improve member outcomes.

John Lonsdale, APRA chair, stated the financial services regulator intended to build on its major policy reforms of recent years and still had “important work to do.”

In addition to work on governance, recovery planning, culture and climate change, Lonsdale said the super sector could “expect no let-up” in their efforts to “expose and eradicate underperforming products or actions that are contrary to members’ best interests”.

In an information paper outlining supervision priorities for 2023, APRA planned to scrutinise board capabilities, tenure, and management of conflicts of interest within super funds. 

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“APRA expects all trustees to have undertaken self-assessments on the themes identified in APRA’s reviews on strategic and business planning, fund expenditure and unlisted asset valuation practices and to have well-progressed plans to address deficiencies.

“The duty to act in the best financial interest of members in relation to expenditure decisions continues to be an important determinant of member outcomes. Business models that are challenged in delivering long-term sustainable, competitive outcomes for members will continue to receive scrutiny from APRA, including consideration of where consolidation will be beneficial.”

Noting interest rate hikes, inflation, and geopolitical factors, it said it would assess to what extent trustees were preparing for these changing environments.

The Your Future Your Super (YFYS) performance test would continue to be used as a test of fees charged to members and investment performance, it stated, along with APRA MySuper and Choice Heatmaps to address product performance. 

APRA also reiterated its focus on influencing improved retirement outcomes with the new retirement income covenant.

“Working alongside [the Australian Securities & Investments Commission], APRA will review how trustees have implemented the retirement income covenant within their business strategies and operations, for the benefit of members, and ensure trustees take steps to address deficiencies where they are identified.”