APRA consults on superannuation operational governance proposals

The Australian Prudential Regulation Authority (APRA) today released a letter outlining proposed changes to the superannuation prudential framework to lift operational governance practices of APRA-regulated superannuation trustees (RSE licensees). Helen Rowell, APRA Deputy Chairman, will announce these proposals during an appearance at an industry event in Canberra.

The term ‘operational governance’ relates to how an RSE licensee determines its strategic objectives, undertakes business planning and runs its business operations on a day-to-day basis. While many RSE licensees have embedded sound operational governance practices throughout their business operations, APRA’s supervision has identified weaknesses in practices of some RSE licensees.

Mrs Rowell said APRA has identified areas where the superannuation prudential framework could be enhanced to reflect evolving industry better practice and public expectations for the prudent and efficient operation of funds, and also to address these weaknesses in industry operational governance practices.

“RSE licensees are expected to operate in a manner that supports long‐term sustainability of their business operations and delivery of quality, value for money outcomes to members.

“The superannuation industry is going through a period of significant evolution and it is incumbent on RSE licensees to be focused on meeting the best interests of members through delivering high quality, value for money member outcomes.

“This extends to RSE licensees making decisions about the use of members’ money in a manner that provides appropriate transparency and accountability, and is demonstrably in the best interests of members,” Mrs Rowell said.

APRA will consult over the coming months on proposed changes to the prudential framework, including:

• requiring RSE licensees to have an operational governance framework, which covers the policies and processes that support strategic and business planning, and ensure rigour in operational decisions, particularly those related to expenditure and reserving;
• expanding the existing business planning requirements to ensure RSE licensees appropriately implement, monitor and review their business plans in the context of clear strategic objectives;
• requiring RSE licensees to meet minimum expectations when making decisions on fund expenditure, with a view to ensuring there is adequate rigour in decision-making, monitoring and transparency related to the use of members’ money; and
• requiring RSE licensees to undertake an outcomes assessment for all members. APRA expects to provide guidance to support this assessment, including the proposed MySuper outcomes assessment.

APRA anticipates releasing a detailed package of draft standards and prudential guidance for further consultation in late 2017.

The letter released today to RSE licensees is available on APRA’s website.