APRA issued a stern warning to super funds to expect a more assertive and demanding prudential regulator that will crack down on underperformance and poor cooperation. But it is being held back by the long-awaited passage of a Bill.
Deputy chair Helen Rowell told the Conference of Major Superannuation Funds (CMSF) yesterday that APRA has turned a new leaf following several issues and recommendations raised from the banking Royal Commission.
Part of its new strategy is to "weed out" underperforming funds, products and options.
Trustees that fail to live up to their obligations, she said, will have very few places to hide.
By way of example, there are three out of 28 outlier funds APRA identified 18 months ago that have not responded adequately.
Rowell said APRA won't disclose the names of the outliers "for now" but hinted it may do so in the future.
The pending passage of a key Bill to strengthen APRA's enforcement powers however is hampering its new initiatives.
Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019, which gives APRA greater power to take civil penalty action against trustees for breaching their obligations to members, has not yet passed Parliament.
It was introduced to Parliament in September 2017.
While APRA is disappointed the Bill has still not passed, it anticipates the legislation will pass given both sides of politics have strongly asserted their commitment to improving member outcomes, she said.
"But we will be using whatever tools and powers we have to get action."
RSEs can expect a letter from Rowell laying down APRA's area of focus in the next week or so.
"It will set out areas where we expect trustees to review and, where needed, improve their performance and operations, and where APRA will focus its attention - based on our own experience in supervising the industry, but also reflecting issues highlighted by both the Royal Commission and Productivity Commission," she said.
RSEs can expect to lift their game in areas like board capability, fiduciary culture and adequately addressing conflicts of interest.