APRA intensifying supervision of fund level expenditure
To: All RSE Licensees
The superannuation industry plays an important role as custodians of Australians’ retirement savings, and decisions made by RSE Licensees on expenditure directly impact Australians’ retirement outcomes.
Despite obligations on RSE Licensees to consider the best financial interests of their members and consistently to promote those interests, APRA has observed deficient practices and questionable expenditure in some areas. As a result, APRA will intensify its scrutiny of fund-level expenditure to hold RSE Licensees accountable to improve practices, reduce spending that is deemed to not be in members’ best financial interests and promote the financial interests of their members.
This letter provides RSE Licensees with clarity about APRA’s planned activity in this area over the next 12 months, in accordance with APRA’s recently released Corporate Plan.
Intensified supervision approach
Across all RSE Licensees, APRA will prioritise supervisory attention on fund expenditure where member benefit is not immediately evident or may not be reasonably justified.
APRA will take a targeted approach, partly informed by SRF 332.0 Expenses data and will initially focus its supervisory efforts on the following:
- Discretionary expenditure categories such as travel, entertainment and conferences;
- Relative and absolute size outliers, including consideration of impact to members;
- Particular types of payees and payments where benefit to members is not immediately apparent.
APRA’s focus on expenditure as part of the ongoing suite of supervision priorities does not mean that all reported expenditure items will be reviewed. APRA’s intent is to focus on those items of expenditure where there is potential to improve practices and outcomes across the industry. APRA’s attention will also be informed by market intelligence and matters of public interest.
Engagement with a number of RSE Licensees is already underway and further work will commence shortly using data submitted for the financial year 2023-24. Where expenditure is reviewed, RSE Licensees can expect:
- APRA to issue notices requiring the RSE Licensees to provide information that demonstrates how they determined that expenditure is in members’ best financial interests. Entities can also expect APRA to review RSE Licensees' decision-making processes, practices and outcomes as well as their ongoing monitoring and oversight of the transactions and expected outcomes. This will include exploring matters of governance, conflicts of interest, and once in effect, attestations recommended under Prudential Practice Guide 515 Strategic Planning and Member Outcomes (SPG 515) and the role of accountable persons under the Financial Accountability Regime (FAR).
- Where deficiencies are identified, APRA’s supervisory effort will focus on ensuring the necessary improvements are made by RSE Licensees. This may include APRA enforcing rectification measures where warranted. In line with APRA’s Enforcement Approach APRA will make enforcement actions public where it is appropriate to do so.
Information gathered during this process will inform APRA’s risk assessment of RSE Licensees and may result in heightened supervision staging.
Next steps
APRA will continue to hold industry and RSE Licensees to account for expenditure practices by promoting strong member outcomes. APRA is committed to publishing an increasing amount of data to improve transparency across the superannuation industry and on 30 October will publish the expenditure data for financial year 2022-23 on both a fund-level and aggregate basis. APRA will publish annual expenditure data on an ongoing basis and anticipates publishing financial year 2023-24 data in early 2025.
APRA will continue to work closely with ASIC to share information and co-operate on matters of mutual interest.
Yours sincerely,
Margaret Cole
Deputy Chair