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    APRA Finalizes Guidance on Superannuation Business Performance Review

    November 27, 2019

    APRA published the final prudential practice guide SPG 516 on business performance review. SPG 516 provides guidance to the superannuation industry on undertaking the new APRA requirements for an annual Business Performance Review under prudential standard SPS 515 on Strategic Planning and Member Outcomes and the new legislated member outcomes assessment. APRA also published its response to submissions on the SPG 516 consultation. SPG 516 is the final piece of guidance to support SPS 515 and it commences on January 01, 2020.

    The proposed revisions to SPG 516 support the amendments made to SPS 515, which were finalized on August 28, 2019. The key changes to SPS 515 were the introduction of the Business Performance Review and requirements to support the outcomes assessment required under section 52 of the Superannuation Industry (Supervision) Act 1993 (SIS Act). APRA received nine public submissions and met with various stakeholders during the consultation period, including conducting two roundtables in Sydney and Melbourne. Overall, submissions were broadly supportive of the revisions to SPG 516. However, some drafting suggestions and issues were raised while some additional guidance on aspects of the Business Performance Review and legislated outcomes assessment were also sought. Hence, the final amendments to SPG 516 are included to:

    • Provide clarity in including benchmarking and comparisons, using available data sources, to help assess relative performance of products based on the outcomes assessment factors under section 52(11) of the SIS Act
    • Provide clarity on how a registrable superannuation entity licensee might incorporate both the outcomes assessment and Business Performance Review into its business planning timetable
    • Reduce uncertainty in a number of other areas such as expanding the expectations in considering insurance product design issues under the cohort analysis of Business Performance Review; clarifying expectations for the cohort analysis under the Business Performance Review for members holding defined benefit and retirement products; improving the clarity of the section covering the comparison component of the outcomes assessment for MySuper products; and removing unnecessary and duplicative drafting from the insurance strategy assessment factor section.

    APRA will also monitor the implementation of the publications of the outcomes assessment information against the guidance set out in SPG 516. Where there are industry-wide deficiencies in the quality of publications on registrable superannuation entity licensees’ websites, APRA will update its prudential guidance to address this issue and will engage with relevant registrable superannuation entity licensees. APRA, however, made some changes to the publication section to improve clarity. APRA and ASIC will also work together closely as the implementation of Design and Distribution Obligations approaches in 2021 and consider whether specific guidance on this issue is required.  

    The Business Performance Review and outcomes assessment requirements represent a new and complex undertaking for many registrable superannuation entity licensees. APRA will be looking for registrable superannuation entity licensees to implement these new requirements on a best endeavor basis during the first year of implementation. However, APRA expects that the depth and sophistication of the analysis in Business Performance Review and outcomes assessment will improve in subsequent iterations as better practice emerges and practical issues are addressed; for example, the availability of additional, more granular data and consideration of a wider range of member cohorts. One way for a registrable superannuation entity licensee to begin this improvement process is to undertake a trial outcomes assessment in 2020, covering all or a subset of its MySuper and choice products. APRA expects that a trial outcomes assessment would provide registrable superannuation entity licensees with insights into the methodology, data, and publication issues that may arise in respect of the outcomes assessment. 

     

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    Effective Date: January 01, 2020

    Keywords: Asia Pacific, Australia, Insurance, Pensions, Superannuation, SPG 516, SPS 515, Business Performance Review, Outcomes Assessment, APRA

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