The super funds industry should introduce voluntary financial health checks to diagnose vulnerabilities and pinpoint risks, said Darren Wickham, principal in Mercer’s retirement, risk and finance business.

“Unlike other areas of the financial services industry, APRA does not require super funds to prepare a financial condition report,” he said.

Wickham said that as the industry braced for post-Cooper change, there was no need to “reinvent the wheel” in designing more robust risk management tools.

Financial condition tools had already helped general, health and life insurers identify dormant risk areas.

Wickham said funds needed to assess four areas: financial strength, fund sustainability, risk, and stress.

Financial strength assessment at balance date included reserves, liquidity, and strength of service providers.

Fund sustainability modelling examined areas such as: exit rates, profiling of those exiting, inactive vs active, pension takeup rates, and investment options used.

Risk review for a financial condition report included a consideration of the fund’s experience of risks and compliance failures during the past year.

Stress testing included deep-dives into liquidity and unit pricing.

For liquidity, Mercer had developed tools to examine the impact of various short- and medium-term scenarios, Wickham said.

For unit pricing stresses, Wickham said, Mercer’s experience in unit pricing and custody/operations was applied to identify problems before they became substantial rectification costs for the fund.