The prudential regulator has lambasted superannuation funds for not taking underperformance seriously and failing to compare themselves accurately against their peers.
APRA deputy chair Helen Rowell said that many superannuation funds are overlooking many of the regulator's guidance and refusing its requirements without "equal gusto."
Rowell highlighted a number of poor practices at the recent AIST Trustees Forum, starting with substandard peer reviews, in which many super funds are pitting themselves against a narrow field and failing to include all of their MySuper products in the assessment.
"Often it wasn't clear to us why certain peer groups for choice products had been selected. Trustees should document how and why they have determined the peer products to be used for their choice product assessments. This will also assist the trustee to satisfy the publication requirements under the SIS Act," she said.
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Trustees are also ignoring several factors that are critical in conducting the outcomes assessment. Some are using "questionable benchmarks", and vaguely describing their fees charged as "not top quartile fees", she said.
In assessing options, benefits and facilities provided, trustees do not clearly link how these affect the financial interests of members. Some did not consider the appropriateness of insurance strategies or if insurance fees charged in relation to the product inappropriately erode the retirement income of beneficiaries, Rowell said.
Several trustees didn't appear to have considered the appropriateness of their fee structures, including the way they split fees between flat and variable charges, when assessing the impact on the members invested in the relevant product.
Rowell said that some approach implementing SPS 515 Strategic Planning and Member Outcomes as a "tick-a-box compliance exercise" after reviewing the varied quality of documentation
Trustees can expect further engagement from APRA as they approach the December 31 deadline for undertaking their first BPR and the February 28 timeline for the first outcomes assessment, Rowell warned.