Regulators APRA and ASIC have given superannuation executives yet another prod to address the lack of appropriate retirement offerings for their members, as the former launches another round of investigations to see if trustees have improved in meeting their obligations under the retirement income covenant.
The discussion took place at the Superannuation CEO Roundtable on Wednesday which – despite its name – was attended by a range of C-suite executives with a mix of duties, but none of the chief executives of the top 10 funds.
Hosted by APRA deputy chair, Margaret Cole, and ASIC’s senior executive leader, Jane Eccleston, the roundtable came after a brutal thematic report from both regulators condemned the industry for perceived slow progress on meeting their obligations under the retirement income covenant, which was legislated by the previous Coalition government and took effect in July last year.
In the following months, APRA said it will issue a survey to check what improvements in retirement outcomes have been or will be made by funds and if they are acting with “sufficient urgency”.
“A positive development noted was an increasing understanding and focus on retirement across funds, rather than retirement being seen as a niche area,” said official notes from the meeting, which were released by the two agencies.
“Although progress has been made, the CEOs collectively recognised that significant efforts are still required to develop retirement offerings for members that will truly meet their needs.”
To meet their obligations, the executives present also indicated the continuous need for strong data security practices to understand their members’ retirement experience and interpret personal information better. This has been a subject of industry debate as funds balance that need with their data management resources.
The other piece
Jonathan Steffanoni, managing partner at consultancy firm QMV Legal, said the course of action on retirement outcome shouldn’t come as a surprise because the covenant’s requirement has been “a weak one”.
But he said what’s notable is the other topic on the roundtable agenda: climate-related financial disclosure.
“The sustainable disclosure update hasn’t been getting the attention it deserves,” Steffanoni said, “It’s a pretty big piece.”
In June, Treasury released a second consultation paper on the framework that will begin imposing reporting obligations on Australian entities from July 2024, bringing owners with over $1 billion in total assets under regulation initially.
Investor Group on Climate Change (IGCC) estimated in its submission that the first stage would capture around 75 per cent of APRA-regulated funds and over 99 per cent of AUM in the country.
During the roundtable, both APRA and ASIC urged super funds to get ready for the upcoming change, by establishing systems, processes and governance practices.
The executives also acknowledged that the management of sustainable finance now has implications for other internal teams like legal, marketing, risk, and compliance. “A takeaway was the need to embed engagement with these issues across the fund,” the official notes read.
The funds agreed to take steps to improve sustainable finance disclosures, but flagged challenges such as the lack of internal and external expertise, standardised taxonomy, and supervision over third-party providers.
“Super funds have their own disclosures to worry about and they will be the consumers of other companies’ disclosures, too,” Steffanoni concluded.
“It’s good to see it [sustainable finance disclosures] on the agenda.”