APRA warns superannuation trustees of substantial changes to come

Australia’s prudential regulator has warned superannuation trustees major changes are in store for the industry.

APRA deputy chairman Helen Rowell: ‘APRA has been driving down this road for a number of years toward our goal of improving outcomes for superannuation members.’ Picture: Annette Dew

Australia’s prudential regulator has warned superannuation trustees major changes are in store for the industry after the shake-up announced by the government in the budget last week.

APRA deputy chairman Helen Rowell in a speech to the Australian Institute of Superannuation Trustees said boards should strap in for “an interesting ride” in the budget aftermath.

She flagged the “substantial impact” of the changes, if passed by parliament, which would “shine a brighter light on fund performance and trustees’ expenditure decisions”.

But Ms Rowell reminded boards that “your ultimate destination is up to you”.

“Although the measures are new, the direction they take the industry is not,” she said.

“APRA has been driving down this road for a number of years toward our goal of improving outcomes for superannuation members.”

Ms Rowell said the release of the MySuper Product Heatmap last year had proven a game changer across the super industry and had already improved ­outcomes for many members.

The MySuper Product Heatmap sees funds forced to disclose fees and costs, as well as average returns and accounts growth.

Ms Rowell noted its release had seen “more than 40 per cent of MySuper members” see their fees reduced since its initial publication in December 2019.

“Further fee reductions have occurred or are planned since then,” she said.

“The flip side, however, is that inaction, or inadequate action, by some funds has meant that too many members still remain in funds where fees are too high and returns are too low.”

She warned boards to think hard about their future amid warnings the industry could see a roll-up of underperforming funds.

“The reality is that some boards remain immature at strategic and business planning processes, and appear not to realise that doing nothing is going backwards and taking their members with them,” she said.

“If these boards are failing to ask themselves the question ‘would my members be better served in another fund?’, we certainly will be, and will also be requiring action to move (them) toward the exit lane.

“These funds will likely fail the annual outcomes assessment, however trustees that are genuinely focused on improving outcomes for their members would be acting well before that happens.”

Ms Rowell said more change might be daunting for superannuation boards, but “the direction we are heading should not be” a surprise.

“The industry has been on notice for years that chronic underperformers need to improve or hand the keys over to someone who can drive better outcomes for their members,” she said.

“Boards are not powerless here.”