Complying with Stronger Super regulations is a distraction from the more important task of maximising returns, superannuation chief executives have said in a candid discussion with State Street Corporation.
The thoughts of chief executives of several major superannuation funds, including QSuper, REST Industry Super, Sunsuper, CareSuper and UniSuper, were gathered at a round table discussion conducted by State Street earlier this year, culminating in a series of papers. The final report to be published tomorrow, Evolving Superannuation Funds for the Future, considers the biggest challenges facing the industry, including the impact of regulatory change.
Of the findings, regulation is creating an extra cost that will be ultimately be borne by members, according to the chief executives interviewed.
“There are so many policies we’ve had to review against every prudential standard. There are now thousands of items of data required by APRA on a quarterly basis, where we used to have a few hundred.”
Michael Dundon, chief executive of VicSuper, echoed the concern of many at the worth of the exercise.
“I’m not convinced any of it has added very much to the outcome for members’ retirement. We have had to absorb an extra layer of regulation and an extra level of reporting that is still yet to come and will be fairly significant.”
While Peter Carrigy-Ryan, chief executive of Commonwealth Superannuation Corporation, said the compliance burden was eating into the workloads of trustees. “One of my concerns is that we’ve seen an ‘executivisation’ whereby a lot of operational elements have gone up to the board, which is quite contrary to other corporate and governance models.”
But, he too had concerns at the cost of compliance: “We’re all spending a lot more money than we originally intended, to make, in many instances, relatively small changes to products.”
The executives identified the four other areas of concern as follows:
- Helping fund members better prepare for retirement
- Defining optimal investment strategies to maximise returns while managing risk
- Ensuring the right systems are in place for monitoring and analysing data
- Deciding whether their fund is better suited to an internal or external investment model.
Ian Martin, State Street’s head of global services for South Asia and the Pacific and head of global markets, Australia and New Zealand, described the conversations with the chief executives as “dynamic, engaging and candid”.
“What we learned is that these changes are forcing many funds to make tough decisions about their futures and to sharpen their thinking about how to achieve the best outcomes for their members,” he said.
The chief executives were quizzed at a roundtable discussion, and the other themes covered will appear in a series of fortnightly articles published on investmentmagazine.com.au over the next two months. The full report is available from State Street tomorrow (Wednesday May 29, 2013).