APRA Welcomes Productivity Commission Report on Superannuation System
APRA welcomed the Productivity Commission’s final report on superannuation as an important step toward delivering better outcomes for members. The report assesses the efficiency and competitiveness of superannuation system in Australia and whether better ways to allocate defaults are needed. The report highlights that the assessment of the superannuation system reveals mixed performance and that the system needs to adapt to better meet the needs of a modern workforce and a growing pool of retirees. The assessment shows that inadequate competition, governance, and regulation have led to these outcomes.
The assessment finds that regulations and regulators focus too much on the interests of funds and not members. Sub-par data and disclosure inhibit accountability to members and government. Regulators need clearer roles, accountability and powers to confidently monitor trustee conduct and enforce the law when it is transgressed. APRA should focus more on matters related to licensing and authorization, ensuring high standards of system and fund performance. It should supervise and enforce the obligations of the licences and authorizations it grants, in addition to requiring all APRA-regulated superannuation funds to conduct formal due diligence of their outsourcing arrangements, at least every three years, to ensure the arrangements provide value for money. Each fund should provide a copy of the assessment to APRA and require all APRA-regulated superannuation funds to include a clause in material service contracts with outsourced providers that obliges the provider not to do or take any action that adversely affects members’ interests. In addition, APRA should:
- Report annually to the Council of Financial Regulators on funds’ progress with implementing the elevated outcomes tests and on fund merger activity.
- Undertake a systematic assessment of the costs to funds of the thousands of legacy products in the superannuation system. If the evidence demonstrates that they represent a significant cost in accumulation, APRA should further refine trustees’ obligations for member transfers so these products can be rationalized.
- Embed product-level reporting within its reporting framework as soon as practicable (no later than 18 months) to enhance visibility of actual member outcomes across all APRA-regulated funds and to bring reporting for the choice segment into line with the MySuper segment. APRA should also expedite efforts to address inconsistencies in reporting practices.
The Australian Government should set an explicit "member outcomes" mandate for APRA in its regulation of superannuation. The report also recommends that the Australian Government should initiate review too examine how efficiently and effectively APRA operates to achieve its strategic objectives in relation to superannuation and the review should be completed and published during 2019. Deputy Chair Helen Rowell said many of the findings and recommendations in the report aligned closely with APRA’s ongoing focus on ensuring superannuation funds delivered quality, value-for-money outcomes for their members. She said that APRA is already addressing many of the areas where the report indicated the organization could make changes or improvements. APRA would consider the Productivity Commission’s comprehensive report, together with the financial services Royal Commission’s final report and the Government’s subsequent response, as part of its review of priorities for supervision of the superannuation industry for the next few years.
Related Links
Keywords: Asia Pacific, Australia, Insurance, Superannuation, Productivity Commission, Prudential Framework, APRA
Previous Article
Andreas Dombret of Bundesbank Speaks About the Future of EuropeRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
