No pain, no gain: APRA

As APRA raises the bar for the superannuation sector, trustees are readying themselves for discomfort. But the prudential regulator believes the pain is necessary for improving member outcomes.

Addressing the Australian Institute of Superannuation Trustees Chairs Forum on Monday, APRA deputy chair Helen Rowell reminded the super sector that while change brings challenges, it also brings rewards.

Pointing to how APRA was emerging from 12 months of scrutiny following the Royal Commission, Rowell said its sharper focus on the outcomes trustees were delivering members was manifesting in a higher bar for funds to clear, which she admitted will bring the sector discomfort.

"And while this will present the industry with further challenges, it also provides opportunities for trustees to improve," Rowell said.

With greater expectations, funds will deliver both better outcomes for members and stronger operations, according to the APRA deputy chair.

To that end Rowell expects all super trustees "should be well progressed towards the implementation of SPS 515", APRA's prudential standard for improved member outcomes, which commences on January 1 next year.

The new standard will see trustees assess the outcomes they deliver members and the performance of their business, which can then be compared to sector benchmarks and other super funds. With the data squarely before them, trustees will be faced with a stark decision: either to improve, or leave altogether.

"For some trustees, the path to self-discovery will be a confronting one, as it becomes clear they are responsible for funds, products and options that are underperforming, and therefore have an obligation to lift their game or exit the playing field," Rowell said.

Rowell added trustees who discover they are underperforming will feel the regulator's newfound heat if the appropriate steps to address their fallbacks aren't taken.

"Those trustees that are willing and able to rise to the challenge will enhance the retirement incomes of their members, as well as help secure their continued participation in the industry," she said.

"On the other hand, those that are unwilling or unable to rise to the challenge will find APRA intensifying the pressure to improve the member outcomes they deliver - and we have new tools and powers that we can exercise to make clear that change is not optional."

Rowell also took the chance to call out the sector for the "considerable amount of vocal pushback" it has generated over APRA's plans to publish heatmaps of the regulator's assessment of all MySuper products.

The data APRA will use to build the heatmaps is already largely published Rowell noted, and the deputy chair said the regulator was disappointed with the sector's response.

While noting the heatmaps posed problems - like misuse and misrepresentation of the system - Rowell said it wasn't a good enough excuse to not press ahead with the plan, a sentiment APRA wants funds to share.

"We aren't allowing difficulty to be an excuse for inaction," she said.

"Trustees that view these heightened requirements as simply a burden to be endured are more likely to find themselves under pressure from APRA to justify their continued licence - in both senses of the word - to manage members' retirement savings.

"For the sake of your members' interests, I hope you rise to the challenge."

Read more: APRAHelen RowellAustralian Institute of Superannuation TrusteesMySuperRoyal Commission
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