APRA has said it will reveal inconsistencies in the way superannuation funds justify marketing expenditure; it has also addressed concerns relating to fund consolidation during a Senate Estimates hearing on Wednesday evening.

APRA chairman Wayne Byers signaled possible enforcement action against funds on the back of a review into expenditure, including advertising campaigns, TV program sponsorship, sponsorships of sporting teams and payments to external organisations.

Byers told the Senate hearing on Wednesday it will release its findings from a review into expenditure by funds within a couple of months.

“Without pre-empting the results, it is fair to say that industry practice, in terms of demonstrating how certain expenditure translates to quantifiable benefits to members, varies considerably,” Byers said during his opening remarks.

When pressed further during a series of questions from Liberal Senator Andrew Bragg, APRA general manager of superannuation Adrian Rees noted that activities funded through Industry Superannuation Australia (ISA) are in the scope of the review.

In May answers to questions taken on notice following a House of Representatives Standing Committee on Economics hearing reviled financial contributions to ISA amounting to 10s of millions of dollars by multiple funds in recent years.

“We expect to be in a position to determine next steps, including whether any enforcement action is appropriate and/or whether adjustments to prudential requirements are necessary, in the coming months,” Byers said relating to the work it had done on expenditure.

Maritime, Hostplus in the spotlight

Fund consolidation was also a topic of conversation during Wednesday night’s hearing with APRA’s Rees noting the prudential regulator is seeing a number of funds talking about a variety of mechanisms to pool assets to get the advantages of scale outside of traditional merger arrangements.

“We need to determine whether [these arrangements are] prudentially sound. Equally we don’t want to be stifling innovation and preventing funds from doing things that are in their best interests and compatible with the law,” Rees noted.

Rees’s observations were off the back of questions about the recent Hostplus and Maritime Super arrangement which entailed Maritime transferring a considerable portion of its members funds into a pooled superannuation trust operated by Hostplus.

“It doesn’t sound like they’re going to be doing much,” Senator Bragg commented referring to Maritime’s role in the arrangement in light of Maritime’s board and trusteeship remaining intact.

“Do you think this is a good model for the industry?,” Bragg posed.

“We think there are going to be a variety of models that trustees will look at as alternatives to a pure merger,” Rees highlighted.

“Mergers can be expensive and can take a long time including finding a suitable counterparty, this [kind of deal] can be done potentially more quickly. Similarly it might be faster and for other reasons a better approach than a successor fund transfer which is another way,” Rees said.

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