APRA’s move to slap licence conditions on HESTA following its admin transfer from MUFG to Grow Inc. is counterproductive.

After all, the regulators want super funds to improve their administration and operational infrastructure in the wake of big scandals at AustralianSuper and Cbus, and have said so publicly and loudly. But a fund that has made an (apparently) good faith effort to do so has now been rapped over the knuckles by APRA because its transfer didn’t come off perfectly.

For some HESTA members, “didn’t come off perfectly” is an understatement. While the fund says that it sent nearly a million emails and 90,000 letters to let members know about the disruption, many still opened the HESTA app in April to discover that they could not easily access their super – often right when they needed it.  

Saying “sorry” doesn’t make it better, and pursuing a policy of stonewalling the media through the process didn’t help. Some sources suggest that the fund’s leaders are in denial about patently true criticisms of their operations, including Conexus-CoreData member experience research, which has found clear deficiencies over a number of years.

But to be publicly chewed out by APRA sends a message that the regulator is happy to compound the reputational risk inherent in any significant technology or admin uplift and acts as a strong disincentive to boards thinking about undertaking one.  

It also lends some credibility to the conspiracy theory that regulators all too often seem to be handing the private sector the very rope by which they later mean to hang them, all under the disingenuous guise of “market guidance”.

“While some disruption is unavoidable when changing service providers, APRA expects that any transitions are well managed and do not result in any unnecessary impact on members’ ability to access their accounts,” said APRA outgoing deputy chair and superannuation czar Margaret Cole.

“APRA’s imposition of licence conditions mean that HESTA is required to take prompt action to address deficiencies. APRA will utilise its powers to hold trustees accountable to meet their obligations to members.”

APRA declined to provide further information on whether the length and nature of the limited– service period was communicated to it, and whether it was updated through the process. It also declined to outline the deficiencies in board governance and risk management it identified, as well as the specific harm caused to members.

HESTA has said that it explored all its options, some of which would have resulted in a shorter limited– service period, but felt that taking the fund offline for longer would result in the best long-term outcome and reduce the chances that something would go badly wrong during the transfer. HESTA CEO Debby Blakey said in a statement that the fund “takes the matters raised by APRA very seriously and [is] cooperating fully with the regulator to resolve them”.

Admin transfers can be messy, and there is a lot to learn about process and communication from HESTA’s case. It’s notable that NGS Super’s own admin transfer has proceeded relatively quietly (after an almost year long delay). But should a fund like AustralianSuper – which has nearly three times as many members as HESTA – ever decide to leave MUFG, that process is bound to be loud and bumpy.

Progress is rarely smooth, but when service levels and quality absolutely must improve, super funds staying where they are could be worse. With that in mind, APRA must seriously consider whether it’s willing to countenance short-term pain for long-term gain.