Australian Prudential Regulation Authority (APRA) board member, Margaret Cole, has used her inaugural speech to suggest more laws are coming for the superannuation space in light of ‘unacceptable product performance’ .
Speaking at the Women in Banking and Finance webinar, Cole said there was still work to do in the super space, despite the innovations that were brought in with Your Future, Your Super reforms.
APRA’s corporate plan had outlined its vision for super members and Cole said she expected to see new laws coming into force. These would cover areas such as “rectifying sub-standard industry solutions” and “eradicating unacceptable product performance”.
“The strategy is well-aligned to the new Your Future, Your Super laws, which reinforce and complement the work we have been undertaking over several years to put outcomes for members front and centre of every superannuation trustee’s strategy and business planning. That doesn’t mean nothing needs to change,” Cole said.
“To the contrary, the new laws are likely to be a catalyst for major changes to the structure and composition of the industry by equipping us with a greater ability to impose consequences on trustees that underperform or fail to put their members’ interests first.”
She highlighted the impact of the performance tests as a measure of identifying underperforming funds, the results of which were released on 31 August, but said it was too early to assess the impact they had on members.
“Given that Australians are traditionally disengaged from their super, we don’t yet know what impact this heightened transparency will have, but it’s reasonable to think many members will head to the ATO’s [Australian Taxation Office] YourSuper comparison tool seeking somewhere else to invest their money,” Cole said.
“In doing so, members’ behaviour could drive further helpful consolidation and change.”
Cole, who previously worked in financial regulation in the UK, also said the number of funds was still too high despite the declining number of funds as the result of merger activity. Since 2014, the number of super funds had fallen from 299 to 170.
“There are still too many funds overall, and still too many persistent underperformers,” Cole said.
“Fees for many products remain too high, especially in the choice sector, and millions of dollars of members’ money is directed toward expenditure that has questionable benefits for them.”