Helen Rowell (APRA) Calls for more Super Fund Mergers

We all suffer from change fatigue at times, but changes to the superannuation framework in one shape or form are almost inevitable as the environment in which the industry operates continues to change and evolve.”  [Helen Rowell, APRA.]

The number of Australian superannuation funds supervised by APRA has fallen from 1900 to 330 during the decade to December 2014.  Speaking at the Australian Financial Review Banking  & Wealth Summit in Sydney on 29 April 2015, Helen Rowell said APRA was expecting more superannuation fund mergers and had been “a little bit surprised” about mergers which had been contemplated by trustees but then had not proceeded.

Ms Rowell stated APRA expected to see a continuation of the industry consolidation trend, which has seen corporate schemes reduced to less than 100, and smaller funds capitulate in order to ensure sufficient scale.   APRA will be seeking evidence from super fund trustees as to how they are preparing a future strategy (business plan) and sufficient scale test analysis, which might even involve a ‘graceful exit from the industry‘ if deemed to be in the best interests of members.

On governance and risk, Ms Rowell declared that in APRA’s view, the Australian superannuation industry still has some way to go to really understand the difference between compliance and risk management.  She said, “ A robust compliance framework to ensure adherence with regulatory requirements is important, but just meeting minimum requirements is not enough.”

Describing governance, risk management and risk culture as inherently linked, she said APRA would be pursuing trustees to develop a risk culture and approach that is focused on identifying and effectively managing risks, and which seeks to meet “the spirit and intent, not just the letter” of  prudential requirements.  “It is very difficult to have robust governance practices if the risk culture of the organisation is poor.”  Ms Rowell referred to overseas research which has produced evidence that good governance adds as much as 1% to pension fund returns.

In concluding her remarks she said APRA would turn to thematic reviews involving liquidity management and stress testing and encourage trustees to look for more meaningful comparisons when comparing investment performance with a focus on investment performance at the product or investment option level which is more pertinent than average performance relevant to peers at the fund level.

A copy of the full speech has been made available on the APRA website and can be accessed here:

The Super System – What is on APRA’s Watch List?


APRA Releases New Package of Reporting Standards

On 28 April 2015, APRA released 31 reporting standards for the Australian superannuation industry. Of these, 26 are final reporting standards and five reporting standards are being released for consultation. Final standards will commence on either 30 June 2015 or 1 July 2015.

Further material changes are anticipated to the 5 standards released for industry feedback.  Specifically, these standards are focused on changes to reporting of investment data, and information required to be included in Product Disclosure Statements for My Super products.  APRA has also agreed to defer the reporting of investment performance data until legislative requirements relating to the “choice”product dashboard have been fianlised.

Transitional relief for lodgment of quarterly returns has been extended for a further two years, allowing quarterly returns to be lodged within 35 (rather than 28) calendar days of the end of a reporting period until mid 2017.

A link to the discussion on the reporting standards may be found  here:

APRA Reporting Standards




APAR Releases Reporting Requirements for Select Investment Options

On 16 January 2015, APRA released its response to submissions received on four reporting standards in relation to APRA regulated superannuation funds.

Select Investment Options relate to certain non My-Super investment options. The reporting standards will require certain quarterly information about investment performance, asset allocation and member flows as well as structural information about these investment options.

Reporting will only be required by those Select Investment Options which exceed the quantitative threshold of $200 million or more than 5% of total fund assets.

APRA Member Helen Rowell said ‘APRA is confident that the final requirements strike the right balance between APRA and other stakeholders having access to necessary information, and addressing industry’s concerns about the costs and complexity involved in reporting this information.’

The requirements in Reporting Standard SRS 533.1 Asset Allocation and Members’ Benefit Flows (SRS 533.1) and Reporting Standard SRS 702.1 Investment Performance (SRS 702.1) will take effect from 1 July 2015.


Release of the Financial System Inquiries report

On 7 December 2014, on behalf of the Government, the Federal Treasurer, Joe Hockey,  released the Financial System Inquiry Report with its aim to provide a blue print for the financial system over the next decade.

Citing the changing landscape since the time of the Wallis Report in 1997, which examined the regulatory arrangements in the Australian financial sector, the Treasurer noted that total Australian superannuation assets were approximately $300 Billion in 1996-7, whereas, today they have reached in 2014-15, $1.8 trillion.

ASFA noted that of the 44 recommendations in the Report, at least 28 of them have the potential to impact on superannuation and retirement savings and lent its support to most of the suggestions. The AIST welcomed the Report, while recognising that “MySuper should be given the opportunity to deliver improved outcomes for default members before any further reforms are considered.”  Tom Garcia, CEO of the AIST, said the AIST would not support the Inquiry’s recommendation to mandate a majority of independents on super fund boards.

Treasury says it will consult with stakeholders up until 31  March 2015, before  making any decisions on the recommendations.

Mercer 2014 Global Pensions Index

The Melbourne Mercer Global Pensions Index  (MMGPI)  is the most comprehensive comparison of pension systems globally currently reviewing 25 retirement systems (impacting 60% of the world’s population) against 50 indicators.

Australia has been recognised, in 2014, as having the second best retirement income system in the world (behind Denmark).   Australia’s jump in placings from third to second (over taking the Netherlands) was the result of the Superannuation Guarantee (SG) increasing from 9% to 9.5%, over the last 16 months, together with a planned (albeit now delayed) increase to 12%. The author of the report and senior partner at Mercer, Dr David Knox stated that increasing SG would be the right long term policy to ensure an adequate and sustainable retirement income system for all Australians.

Denmark holds the number one spot, with a system identified as being well funded, with good coverage, developed regulations, high levels of assets and contributions, with the provision of adequate benefits.

Trust and transparency were identified as key future requirements for continued success by Dr Knox, who states that for effective system “Governments, regulators and financial industries, have to ensure good governance frameworks and practices that promote regular, easy to understand communication, clear benefit projections, and access to comparative information in a cost efficient manner“.

Suggested measures for improving Australia’s system included:

  • Increasing labour force participation rates for older workers
  • Introducing mechanisms to increase the pension age as life expectancy increases
  • removing legislative barriers to encourage more effective retirement income products





ATO processes first Superstream contributions

The ATO has commenced processing its first Superstream contributions from August 2014, with further selected groups adopting the new procedures through to November 2014 as part of an induction process.

SuperStream refers to a suite of measures designed to help make the back office operation of super funds more efficient.  It requires employers to process contributions electronically ensuring that payments and data are provided on the same day, under a new Data and Payment Standard.

The Superannuation Funds and providers participating in the First Group identified as part of the pilot scheme were, VisionSuper, AMP, IOOF, CBUS, HESTA, and REST.  Administration service providers included AAS and SuperPartners.

The ATO has confirmed that they have received confirmation of end to end transactions from most of the transactions undertaken to date.


FSC Produces Report findings: Australian Superannuation Returns are the third highest in the world

On 7 August 2014, the FSC announced at its annual conference, that it had received the results of research undertaken by Deloitte – Access Economics, indicating that Australia had the third highest superannuation returns from 12 countries included in a study.   Data cited from Chant West stated that the medium return was 8% p.a. since the commencement of compulsory superannuation, net of investment fees, and tax.  Additional research undertaken by Rice Warner Actuaries for the FSC also indicate that the introduction of MySuper had contributed to an immediate and significant lowering of fees in default superannuation.


APRA Releases Quarterly Superannuation Performance (Interim Edition)

On 21 August 2014, APRA released its quarterly statistics for the period ending 30 June 2014. Australian superannuation Assets now total approx. $1.85 trillion, a 15% increase over the twelve months to 30 June 2014.  For the June quarter assets increased by 2.6%. Contributions for the June quarter totalled $27.6 billion (up 5.9% from June 2013) with total contributions for the financial year coming in at $95 billion. Total benefit payments for the June quarter were $14.7 billion (an increase of 8.3% from June 2013) and totalling $55.3 billion for year ending 30 June 2014.

Net contribution flows (contributions plus net rollovers less benefit payments) totalled $12.4 billion for the June 2014 quarter with net contributions flows for the year ending at $37.3 billion.

The Quarterly Superannuation Performance Statistics are obtained from superannuation entities with at least $50 million in assets, representing 210 superannuation entities, broken down as 192 superannuation entities and 18 public sector schemes.

The full Report is available on the APRA website.



FoFA – Acting Assistant Treasurer Announces Way Forward

On 20 June 2014, Senator the Hon Mathias Cormann, Minister for Finance and Acting Assistant Treasurer, announced the go forward position on financial advice laws known as FoFA.  After a further period of consultation with stakeholders and industry participants Senator Cormann stated the right balance had to be achieved between appropriate levels of consumer protection and access to affordable and scaleable financial advice.  The Government has consistently stated that the original FoFA Reforms as proposed by the former Labor Government had failed to strike this balance.

Where legally possible some of the reforms will take effect from 1 July 2014 by the Government exercising its power to make regulations.  Pending further debate by Parliament on some key changes, additional measures will take effect between 1 July 2014 and 31 December 2015. This includes:

  • Removal of the ‘opt in” requirement which requires investors to provide written agreements every 2 years in order to confirm continuity with on-going fee arrangements;
  • Removal of the ‘catch all’ provision in relation to an adviser acting in the best interests of his or her client;
  • Improved access to scaled advice to enable more affordable advice;
  • Removal of the requirement to send fee-disclosure statements for pre 1 July 2013 clients.

With the ban on commission/conflicted remuneration, Senator Cormann stated that payments under a balanced scorecard method for general advice,  where they do no conflict with advice would be permitted but they cannot be be up-front or trail commissions.


ASIC Guidance for Disclosure on Superannuation Websites

On 16 June 2014 ASIC released guidance [Regulatory Guide RG 252]  to help superannuation trustees disclose information about superannuation funds and their trustees on their websites with the intention of enabling increased transparency by the industry.  

The changes form part of the Stronger Super reforms which start from 1 July 2014. From next month, superannuation funds must also actively publish on their websites details of  remuneration received by their executive officers and individual trustees, including any appointments and termination/retirement benefits.  In addition copies of the governing rules, actuarial reports and summaries of ‘Significant Events’ that have occurred over the past two years must be kept up to date at all times. 

Regulatory Guide 252 Keeping superannuation websites up to date (RG 252) states that a website will be viewed as being up to date if the information is within 20 business days. For information on remuneration, a website needs to be updated within four months. These time frames are referred to as a ‘safe harbour’ which means that super companies will be viewed as complying with the law if they update their website within these time frames.

The timeframes are set out in Class Order [CO 14/509] Keeping RSEs’ superannuation websites up to date.