The peak body for industry superannuation has urged the prudential regulator to show funds how they can prepare applications for MySuper licences without clear legislation. The Australian Institute of Superannuation Trustees (AIST) says not enough information about MySuper has been released to enable funds to prepare to accept member contributions under the new default fund regime. The Australian Prudential Regulation Authority (APRA) is responsible for licensing MySuper funds, which are slated to begin from 1 July 2013.
“If funds can only accept default contributions through MySuper, then getting licenced is a priority because most funds get the vast majority of member contributions through default funds,” says Fiona Reynolds, chief executive officer of AIST. “We’re confident that APRA is up to the task. But delays mean there is more pressure on APRA and on funds.”
The two tranches of MySuper legislation that have been released do not tell funds what they must do to comply with the law. “There is still a great deal – if not the majority – of issues that need to be dealt with in the coming tranches,” Reynolds says. It’s unclear when the remaining two instalments of the legislation will be released. “Funds will get on and do this work. But they can’t if they have only half the pieces of the puzzle.”
Reynolds, who raised these concerns at the Parliamentary Joint Committee hearing about MySuper on 2 March, says that contingency plans such as granting provisional licences that can later be formalised after 1 July 2013 should be discussed. There was no talk of delaying the start of MySuper at the hearing, she says.
APRA originally expected about 400 MySuper applications from the industry, AIST says. But after companies with more than 500 employees in their corporate super funds were allowed to create MySuper products, the number of expected applications increased 10-fold, creating a larger workload for APRA.
AIST is also concerned that MySuper legislation will consider scale to be more important than net returns. “If you’re a small fund delivering better returns than a larger fund, we ask: ‘What’s the problem?’,” Reynolds says.
The $4.2 billion Catholic Super returned 3 per cent and 6 per cent in the five- and seven-year periods to 31 December 2011, making it the best-performing growth super fund for these timeframes, according to researcher Chant West. The AMP Future Directions Funds returned minus 1.1 per cent and 3.2 per cent in the same periods, ranking 47th and 42nd for these periods.