Superannuation industry bodies have come out in support of a sweeping regulatory overhaul of the $1.3 trillion industry that will require funds to hold capital in reserve and to publish the remuneration of trustees and executives.

The Australian Prudential Regulation Authority (APRA) released a discussion paper last week that outlines increased supervision of the industry aiming to bring regulatory oversight to a similar standard as that in the insurance and banking industries.

The chief executive of the Australian Institute of Superannuation Trustees (AIST), Fiona Reynolds, says the proposed changes that seek to improve governance standards at funds are in line with the governance framework the institute already advocates.

“We knew this type of regulation was coming and the main concern of the industry was to make sure that the approach of APRA was flexible,” says Reynolds.

“It is clear that with many of these standards that APRA will not take a one-size-fits-all approach and will look at how different funds operate and the different circumstances with which they might manage such things as operational reserves. At first glance it looks like this is the right approach, but the devil will be in the detail.”

In the past, APRA only had the power to provide guidance to funds. But under new supervisory powers given to the regulator by the Federal Government, APRA will be able to set prudential standards from 2013.

Financial Services Council chief executive officer John Brogden says the new standards will become a critical part of the superannuation regulatory framework and the industry will engage in extensive consultation with APRA on the development regulation.

He says some funds would need to lift their game to meet the requirements of a suite of proposed changes that include more rigorous and transparent policies around such things as risk management, investment, governance and outsourcing.

“While a large number of super funds will already be meeting these governance requirements, it will appropriately raise the bar for many others,” Brogden says.

The Association of Superannuation Funds of Australia (ASFA) also lent its support to improved regulatory standards, saying that it had long called for APRA to have standard-making power for the industry.

ASFA chief executive Pauline Vamos says current disclosure requirements could actually make it difficult for trustees to provide transparent disclosure and that it was timely to revisit regulation in this area.

As part of its response to the discussion paper, ASFA will hold a round of national seminars during October to canvass the views of members on the changes.

There has been concern that compliance with the new improved standards may result in higher costs to funds.

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