Super commissions to remain an unknown quantity for APRA

Despite admitting serious flaws in its super fund expense data the Australian Prudential Regulation Authority (APRA) is in no rush to change reporting rules that would force providers to reveal commission expenses, the Senate heard last month.

At a Senate Estimates hearing on May 31 Charles Littrell, APRA head of policy research and statistics, said while the regulator was happy with its fund net returns data it could not accurately separate gross returns from expenses. “We also have a deficiency in that we do not collect in many cases the front end and ongoing commissions… They would largely be run by retail funds,” Littrell told the Estimates hearing after questioning from Nick Sherry, Labor financial services spokesperson. “At this point, following up on our previous advice, to sort that issue we would have to substantially amend our current collections. That is not particularly a priority at the moment in prudential terms because the net return is what we need for that.” However, he said APRA has done “quite a lot of work” in refining its super fund data collection system and more detailed expense data might be available in 2008. APRA has been investigating how to improve its super fund expense collection for the last year at least and Littrell said it had become apparent it would be a “reasonably major task” for the industry to report its fee and commissions split from net returns. He estimated the average expense of a retail super fund was 150-200 bps and commissions probably made up 25 bps of that. “So from our perspective, the inability to satisfactorily separate out the ongoing expenses is a much larger issue than the inability to separate the ongoing planner commissions. We would like to know them both, to find them both out,” Littrell told the Estimates committee. He denied Sherry’s suggestion that super funds were deliberately not “fessing up” with commission information and blamed the problem on data collection systems within the industry.