Expenses spared as APRA admits super data deficiencies

The Australian Prudential Regulation Authority (APRA) has decided to indefinitely remove expense ratios from its published superannuation statistics because the quality of data collected from funds has been so poor.

According to APRA, super funds have continued to disclose expense data poorly despite a lengthy consultation process between the regulator and the industry last year to explain new reporting standards. “Nonetheless, the need for additional clarification is typical in a new statistical collection, and it has become apparent that APRA will need to refine its collection of direct and indirect expenses,” APRA told I&T News last Friday. “In the interim, APRA has removed expense ratios from its statistics publications. APRA will reintroduce these ratios when expense data is of sufficiently robust quality.” The new expense data would not be available for at least two years, APRA said. “APRA will need to amend the superannuation returns to collect certain information from trustees. Any revised reporting requirements would not become effective prior to the 2008 reporting period at the earliest.” Super funds are currently required to all “separately identifiable expenses” associated with generating returns on their investment portfolios and all other operating expenses. Because super funds are only required to report indirect investment expenses where they are separate and easily identifiable APRA said its data in this area is generally understated. It is understood many funds have failed to provide sufficient data on the level of fees and commissions they pay to third parties. As well some funds have been blurring the line between investment and administration expenses. “Some entities also net some expenses from investment income reported to APRA,” the regulator said. “This includes expenses incurred from investments in pooled superannuation trusts and life insurance companies.” John Laker, APRA chair, told a Senate Estimates committee this February that an amendment to the Financial Sector (Collection of Data) Act may be necessary to force super funds to supply better expense information. However, APRA told I&T News it was currently redesigning its super fund return forms again and a change to the Act would probably not be necessary.