APRA deputy chair Helen Rowell has slammed the trustees of poor-performing superannuation funds and warned that the prudential regulator will put even greater pressure on them to lift their game following the publication of a widely-anticipated review of individual fund performance.
“APRA will again raise the bar for trustees, and you can expect to feel a degree of discomfort,” she said in a speech to the Australian Institute of Superannuation Trustees Chairs Forum in Canberra on Monday.
Rowell said the prudential regulator will turn up the heat on underperforming funds through a stronger prudential framework, more intense supervision and a lower threshold for taking formal enforcement action.
During her speech, she spoke about the prudential regulator’s “heat map” or “traffic light” system aimed at identifying and weeding out poorly performing super funds.
She also noted the noted the huge amount of publicity the new analysis tool has generated.
“Beyond any unease about benchmarks or methodology, we suspect the real concern for many trustees is the prospect of having their performance publicly exposed in a simpler, credible and insightful way by APRA – especially among those with an inkling that their place on the heatmap will be at the hotter end of the colour spectrum,” the regulator’s head of super added.
“We don’t resile from the fact that the heatmap is designed to challenge the trustees of underperforming products to consider where their performance needs improvement, and to take action in response.
“We are in the process of finalising all the details of the methodology and measures we will use for the heatmap, and exactly how we will present them.
“But what I can share with you is that the heatmap will not include a single, overall product level assessment. Rather, the heatmap will display performance across a range of metrics in the areas of investments and fees and costs, and provide indicators for trends in sustainability measures.”
The deputy chair also said the lack of transparency and the complexity created by the sheer number of products made it harder for members to compare their fund’s performance across the industry. However, by collecting and publishing a wider range of more granular data, the regulator will make it much clearer to all stakeholders which trustees need to lift their game, and where.
“Trustees that view the heightened requirements as simply a burden to be endured are more likely to find themselves under pressure from the regulator to justify their continued licence to manage members’ retirement savings,” she said.
“A smarter alternative is for trustees to embrace the opportunities that change provides – to genuinely reflect on their performance, take decisive action to address areas of weakness, capitalise on the insights flowing from enhanced transparency, and emerge stronger and more effective as a result.”