The Australian Prudential Regulation Authority (APRA) has warned that, while the 2013 prudential framework has led to some improved practices across the superannuation industry, further enhancements are needed for it to remain fit for purpose.
The regulator found that although the objectives of the framework were largely met, the evolution of the industry and changing stakeholder expectations meant that more change may be necessary.
Specifically, APRA believed that the nomination, appointment and removal processes of RSE licensees needed strengthening, as well as more explicit detail on the fitness and proprietary requirements for responsible persons.
The requirements for managing conflicts of interest could also do with strengthening, as could considerations related to outsourcing and insurance inside superannuation arrangements. So too could investment governance considerations, including clarification of the factors licensees must consider for choice investment options.
To manage risk, APRA recommended that the risk management standard be harmonised with the equivalent standard applied to other industries, as with as a review of the operational risk financial requirement. The scope of business continuity management should be expanded to ensure RSE licensees considered the impact of events not directly connected to their business operations.
Finally, the regulator suggested enhancements to superannuation reporting standards, specifically pushing for current definitions to be both suitable and more consistent, for the level of materiality to reflect the purpose who which data was collected, and for appropriate coverage of both choice and MySuper products.
Positively, APRA’s review of the framework also found that stakeholders didn’t identify any material unintended consequences of its implementation.