Regulator

APRA releases superannuation statistics for March 2023

On 23 May 2023 the Australian Prudential Regulation Authority (APRA) released its Quarterly Superannuation Performance publication and the Quarterly MySuper Statistics report for the March 2023 quarter.  Key statistics for the superannuation industry as at 31 March 2023: 

Superannuation assets increased by 1.1 per cent over the past year to around $3.5 trillion at the end of March 2023. This reflected a rebound in financial markets over the December 2022 and March 2023 quarters and continued strong contribution inflows. Contribution flows were in part driven by the Superannuation Guarantee (SG) increase to 10.5 per cent from 1 July 2022 and strong employment.

ASIC releases Information Sheet 278: Inventory of superannuation trustee transparency and disclosure obligations

On 1 April 2023 ASIC released a new information sheet as a resource to consolidate superannuation trustee disclosure obligations. ASIC believes trustees must stride to meet their obligations to ensure accountability, transparency and better decision making by members.

Choice Sector Performance

APRA has published its analysis of performance of Choice superannuation products and will soon issue its Choice Product Heat-map similar to the MySuper Heat-maps recently released.

The Choice sector currently comprises 46% of the APRA regulated superannuation industry, ($859 billion), with some 568 Choice products available in the market.

The Choice sector typically enables members to exercise greater control over their superannuation investment strategy, by providing broader investment choices than those in a typical MySuper investment option. This might include a diverse range of fund managers, and single investment security options (i.e. shares and term deposits) and while APRA recognises this can be a positive feature of superannuation, providing greater member engagement, it raises the concern of complexity, additional costs, inefficiencies and the potential for sub-optimal outcomes for members.

The Information Paper was issued in October 2021, and outlines how APRA will be holding trustees to account for the outcomes they deliver to their members.

From 2022, APRA will produce the Choice Product Heat-map and the Your Future, Your Super, performance test.

A link to the APRA Information Paper is provide here.

Federal Court fines Trustee Colonial First State Investment Limited (CFSIL) $20 Million for Misleading Conduct

On 19 October 2021, the Federal Court issued a Penalty against CFSIL, as trustee for the Colonial First State FirstChoice Superannuation Trust, for breaches of the Corporations Act when it was found to have provided misleading and deceptive communication to its members. The illegal conduct included:

  • informing members that Colonial must contact them to seek a direction to remain in the FirstChoice Fund, when no such requirement had been needed; and
  • failing to inform members that if Colonial did not receive an investment direction from a member, it was required to transfer the member into a MySuper product.

The Court found that the approach by the Trustee was a deliberate and intentional strategy to mislead and retain members in the FirstChoice product rather than move them to a MySuper product.

In his decision Justice Murphy found that the conduct “involved making false or misleading representations to approximately 13,000 members of the fund, in a concerted campaign which went on for more than two years, and that its contravening conduct involved, in effect, seeking to take advantage of members, whose interests, it was, as trustee of the fund, duty-bound to protect”.

Colonial was also ordered to publish an Adverse Publicity Order and to pay ASIC’s legal costs.

The Judge acknowledged Colonial’s remediation program, currently amounting to $67 million, without which, the Judge said, the penalty would have been significantly higher. In determining a fine of $20 million the Judge stated:

“..this is just and appropriate, for the totality of the contravening conduct having regard to the seriousness of the contraventions, including the number of breaches, and the period over which they occurred, that the conduct involved senior management, that Colonial was acting as a trustee when it committed the breaches, that the conduct caused substantial losses, and the need for specific and general deterrence, and taking into account the substantial remediation program.”

CPS511 – APRA Issues Draft Guidance on Remuneration

The new Prudential Standard is expected to come into effect from 2023.

On 30 April 2021, APRA issued draft guidance open for consultation until 23 July 2021. The Guidance aims at providing principles and good practice for RSE Licensees in relation to their business models and financial risks.

APRA has stated it will make further adjustments to the Standard and the Guidance following finalization of the Financial Accountability Regime.

The key expectations of the new Standard will require Trustees to:

  • provide continuous disclosure on remuneration governance and oversight including transparency over the Remuneration Policy and process undertaken to determine remuneration outcomes;
  • provide details on how remuneration is designed including any financial and non financial performance measures, and any rationale for weights given to each measure;
  • disclose remuneration outcomes for specific individuals including material risk takers; and
  • outline any consequence management applied, including details of any downward adjustments.

APRA is mindful that some information may be commercial in-confidence and the privacy of individuals will need to be balanced and Trustees will need to consider how it will maintain these protections while also providing sufficient information to meet the requirements of the Prudential Standard.

Timeline from here

  • The new Standard is expected to be completed before the end of 2021.
  • Trustees will be expected to comply with the new Standard from 1 Jan 2023 with staged implementation