APRA Executive Director of Superannuation Carmen Beverley-Smith - 2023 ASFA Conference panel discussion

It’s great to be here, along with Jane from ASIC and Emma from the ATO, to share our perspectives and priorities in relation to super.

One of the advantages of my role is that it provides me with a broad, industry-wide perspective on superannuation, including its interconnectivity with the wider economy and its importance to the future of so many Australians. I also have the opportunity to meet regularly with trustees face-to-face which helps me to build a deeper understanding of individual funds’ specific achievements and challenges. 

APRA often speaks in general terms about “the industry”, however our interactions enable us to recognise the context and challenges each trustee faces in overseeing their fund for the benefit of their members. This recognition is reflected in our approach to supervision and the intended proportionality in our implementation of policy reforms. 

That said, not all trustees are as enthusiastic as I am about the scale and pace at which APRA and other regulators are implementing those reforms. Having met with many of you over the past eight months, I am encouraged by the industry’s commitment to improving member outcomes and acknowledge the work underway to improve the resilience of funds.

Yet, there is more to be done. APRA won’t slow its efforts to foster a more resilient, more sustainable, member-focused super industry. We are committed to working closely with peer regulators and industry bodies, including ASFA, to address pressing issues with urgency.

Transparency

Enhancing transparency in super is a continuing area of focus for APRA. Trustees, collectively, steward $3.5 trillion of member assets and it is appropriate that the community has good visibility of how this substantial pool is being managed and invested. 

The legislated annual superannuation performance test and APRA’s heatmaps have significantly enhanced the transparency of fund product performance – and more particularly, underperformance – in the MySuper and, more recently, the trustee directed product segment of the choice sector. 

This week, APRA released a performance test insights paper which has drawn on the 2023 test data to shed further light on the industry’s performance metrics and fees.  We also published the numerical results of each fund’s product performance against the test’s benchmarks. From next year, a comprehensive transparency package covering investment returns, fees and performance test metrics will be published soon after the annual performance test. 

In another step towards enhancing transparency in super, we are today releasing a consultation on the second phase of our Superannuation Data Transformation. The consultation sets out our proposals to strengthen our data collection in areas including trustee board governance and investment valuation and liquidity management.

In developing these proposals, APRA has sought to minimise regulatory burden on industry by requesting only data that trustees already hold. We have also worked closely with peer agencies with the goal of ‘collect once and share’ where feasible.

APRA seeks to publish as much of the data we collect as possible to further increase transparency. We’re currently consulting with industry on how we publish total fund expenditure and expanded asset allocation data by mid-2024. 

Members are entitled to expect access to comparable, quality information about their funds’ performance, expenditure, and governance. This information will substantially enhance visibility of how members monies are spent and invested.

Prudential areas of focus for 2023-24

At an industry event at the end of last month, APRA Deputy Chair Margaret Cole outlined how APRA is responding to feedback from the FRAA Review (and, by extension, feedback from many of you in this room) by continuing to be transparent with industry about our priorities. To this end, APRA recently wrote to all trustees setting out APRA's prudential areas of focus for the current financial year. 

The letter outlined what trustees can expect from APRA. Trustee feedback has ranged from “it’s extremely helpful to learn more about what APRA is doing and why,” and “this will support how we map out our resourcing for the year,” to “this highlights just how much is coming down the line.”

Given the operating environment, APRA’s priorities for industry will not come as a surprise. They include:

• ensuring sound investment governance practices, particularly in relation to asset valuation and liquidity risk management;
   
• uplifting operational resilience including in cyber security and technology;
   
• addressing product under-performance;
   
• understanding trustee progress in managing climate-related financial risks;
   
• embedding recovery, exit and resolution planning; and
   
• preparing for implementation of the Financial Accountability Regime in superannuation in 2025.

One final priority, which I will touch on in a little more detail, is improving retirement outcomes. 

Further to the release of APRA and ASIC’s findings from our joint Retirement Income Covenant review, we set an expectation for all trustees to consider their own retirement incomes approaches and to address any shortcomings. Last week we issued a survey to gather information about the self-assessments trustees have undertaken. We look forward to receiving trustee responses by early 9 February.

One of the shortcomings identified by the retirement income review was the lack of measures in place to assess the quality of retirement outcomes being provided to members. After looking more closely at how trustees evaluate retirement product outcomes versus choice accumulation product outcomes, we have found that there isn’t much difference in the approach for either product segment.   

While this might make some sense, we believe trustees may want to consider taking a more nuanced approach for retirement products that is more closely aligned to the needs of retirees.

A coordinated approach to lifting industry standards

As a final point, I would like to reiterate APRA’s commitment to working constructively with our peer agencies and industry bodies. At this critical time of growth in the superannuation system, we need to address a range of pressing issues and vulnerabilities with urgency. We must also ensure the industry scales appropriately and remains operationally resilient. 

One of the key areas that needs to be addressed is the delivery of member services, particularly death benefit processing and complaint handing. Jane will address this in more detail. Cyber and fraud risks are also high on our collective radar, and a topic on which Emma will be sharing the ATO’s perspective.

Thank you.