APRA slaps traffic light ratings on super funds

The prudential regulator confirmed a "traffic light" system aimed at weeding out underperforming superannuation funds is currently in the works.

Deputy chair Helen Rowell flagged APRA is developing a heat map based on four key areas -investment returns, fees and charges, sustainability and in due course insurance - that will be tested on the performance of MySuper funds and eventually broadened to choice products.

By the end of 2019, Rowell expects such additional information on super fund performance will be published.

"This initiative will provide clear, simple insights into how various funds and products are performing, and help stakeholders better understand the performance of the superannuation industry in delivering on its retirement income objectives," she said.

Rowell warned the new appraisal system adds to the pressure APRA is applying on trustees of underperforming funds to promptly address weaknesses or consider whether restructuring or exiting the industry is in their members' best interests.

"Where trustees fail to respond appropriately, APRA will not hesitate to use its new directions power to protect the interests of superannuation members."

Separately, APRA confirmed Prudential Standard SPS 515 Strategic Planning and Member Outcomes would require all RESs to perform APRA's annual Business Performance Review (BPR) to assess whether they are delivering sound, value-for-money outcomes for members.

SPS 515 complements the newly legislated Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Act 2019, she said.

Where the legislation requires RSEs to assess member outcomes at a product level, the BPR requires an outcomes assessment across a range of metrics for different member cohorts.

Furthermore, Rowell said licensees must consider whether they will continue to deliver quality outcomes for all members into the future and take action if they identify areas of improvement.

"Working together, SPS 515 and the legislated outcomes assessment will strengthen APRA's ongoing efforts to lift industry practices and drive improvements in the outcomes all RSE licensees deliver for their members," she said.

SPS 515 will take effect on 1 January 2020.

On August 28, APRA released a final version of prudential practice guide SPG 515 Strategic and Business Planning to assist RSEs implement the new requirements.

It also published a draft version of SPG 516 Business Performance Review, which is open for a six-week consultation period. APRA expects the final version will be released in December.

Read more: APRASuperannuationHelen RowellMySuper
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