Increased transparency and scrutiny expected for super

In his final speech, Australian Prudential Regulation Authority (APRA) chair, Wayne Byres, has warned the superannuation industry to expect further scrutiny and increased transparency.

Speaking a FINSIA event, his final speech before his departure at the end of October, Byres said he believed increased transparency had been the single most-impactful change on the industry. This included the APRA heatmaps and statutory performance test.

He said: “Much of the scrutiny and change, I think, has been necessary to produce a better super system and it has produced a better system. The reforms have undoubtedly driven significant positive change.”

“The one that’s been the most impactful has been the increased transparency that’s been forced on the industry.

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“Given the weak accountability that most super trustees are subjected to, by virtue of their ownership structure and limited member engagement, corporate interest in self-interest can sometimes outweigh member interest. Transparency has been key to increasing the discipline of trustees.”

Looking ahead at the regulator’s focus, he said there would be improved data collection focused on driving member outcomes and highlighting trustees who were failing to perform for their members.

“I'm not suggesting every single thing about a fund's operations must be public. Clearly there'll be commercially-sensitive information that could actually disadvantage a member if it were to be disclosed and just pumping out reams of raw data isn't going to be helpful either.

“But we will be shining a spotlight on trustees who are not performing for their members, no place to hide, and that spotlight is only going to get more intense.”

Referencing the Your Future, Your Super test, which was currently being reviewed, Byres added the regulator had received concerns about index-hugging. However, he did not necessarily agree this was a concern and could have actually led to improved fund outcomes.

“We should specifically look at the issue of index hugging, some people have expressed concern about that and it is a legitimate concern that we have to watch and think about.

“But to be blunt, there’s always been a tail of funds where actually, if they had been index hugging, then members would be a lot better off so there’s always a trade-off to be had.”