Is too much expected of APRA's superannuation fund data?

Is the Federal Government and the superannuation funds industry expecting too much of the Australian Prudential Regulation Authority on the question of delivering fund-level data.

The Australian Prudential Regulation Authority (APRA) is not only this na tion's prudential regulator, it is also a Commonwealth statuto ry authority funded in the 2008- 09 financial year to the tune of $101.1 million.

It goes without saying that prudential regulation of banks, insurance companies, credit unions and superannua tion funds sits at the core of APRA's responsibilities. Statisti cal collection, it would seem, is an ancillary activity.

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And herein lies the catch. Is APRA really the right agency to be tasked with the collection of bet ter data on superannuation fund performance? Is it adequately re sourced to do the job properly?

APRA has been asked by the Federal Government and, indeed, some sections of the superan nuation industry to lift the level of its data collection such that it can ultimately publish fund-level data that will be useful to su perannuation fund members.

Given that, until the Govern ment's request, APRA had been providing aggregated data, there has to be a real question mark hanging over its capacity to move to the type of disaggregated model capable of satisfying the entire superannuation indus try, particularly the retail master trusts.

When APRA in mid-November, last year, issued a consultation paper regarding its handling of the Government's request, it said it intended to publish, as a min imum, a reference publication at the individual fund level that "would allow informed observers to calculate their own compar isons of superannuation fund performance".

It said the target date for this publication would be around April 2009, using annual data pro vided to APRA from the June 2008 and prior collections.

It said it was separately investigating a broader update to both its su perannuation statistical collec tions and its publications that was intended to lead to updat ed superannuation collection in 2010, with new publications to commence in 2011.

Those within the upper ech elons of APRA must be keenly aware of the fact that they are in creasingly treading a political tightrope.

They must be aware that the whole issue of super annuation fund performance data collection is already be coming a politically charged, with the Federal Opposition in Feb ruary reflecting some of the in dustry criticisms that the pro posed methodology is flawed and sloppy.

The Federal Opposition Spokesman on Financial Ser vices, Chris Pearce, claimed "the chosen method is fundamental ly incorrect for the purposes of the exercise".

He said the published data would reflect merely an aggregate return of a fund's total investment and would not take individual in vestment options into account.

Pearce's comments appear to strongly echo the views con tained within the submission compiled by the Investment and Financial Services Association (IFSA) which, while welcom ing some of the longer-run ele ments of the regulator's ap proach, was critical of the more immediate intentions.

The IFSA submission said: "Given the past experience with sector level RoA [Record of Ad vice] reporting and the current appetite for superannuation data fuelled by volatile markets, there is a real risk that APRA's publi cation will misrepresent the in dustry, be misinterpreted by the media and mislead superannua tion members.

"It does not appear that APRA has assessed the information needs of superannuation mem bers and stakeholders or con sidered fully whether the data they intend to publish meets those needs.

"The plan also lacks a thorough risk assessment, considering how the information it publishes may be used, and strategies to mitigate those risks," the submission said.

"APRA's plan to publish trust level RoA data is considered by the industry to be a dangerous compromise between the infor mation that APRA holds and the information that superannuation members need."

Significantly, the Association of Superannuation Funds of Aus tralia (ASFA) has expressed sim ilar disquiet, stating: "ASFA for mally expresses our concern regarding the ability of APRA to provide information which will be useful to superannuation fund members based on the informa tion already held.

The reason for this is that the structures and practices of the industry mean that the data already collected is not at the right level to relate to individual superannuation or retirement funds. As such, the data would be misleading for fund members.

The bottom line seems to be, notwithstanding the desire of the Federal Minister for Superan nuation and Corporate Law, Sen ator Nick Sherry, APRA is simply not yet in a position to supply bet ter fund level data.

In all the circumstances, APRA needs to clarify its position with respect to its capacity to deliv er what both the Minister and the industry clearly want. At the very least, it would be helpful if the regulator simply acknowledged that delivering appropriate data will take longer than it original ly envisaged.




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