APRA and ASIC levy costs up 150% in 10 years

Mike Taylor

Managing Editor/Publisher, Financial Newswire

15 June 2023

The Government has been urged to abandon the asset-based model imposed on superannuation trustees to fund the Australian Prudential Regulation Authority (APRA) and to adopt a user-pays approach.

The call has come from superannuation funds amid estimates that the cost of levies imposed on superannuation funds to fund both APRA and the Australian Securities and Investments Commission (ASIC) has increased by around 150% over the past 10 years.

Both the Association of Superannuation Funds of Australia (ASFA) and the Australian Institute of Superannuation Trustees (AIST) have pointed out the magnitude of the levies and questioned how they can be justified in circumstances where the number of fund in Australia is declining.

Both organisations have pointed out that, ultimately, the levies are funded through administration fees charged to members.

Against the background, the AIST has pointed to the areas of focus for APRA including underperforming “choice” superannuation products.

“This indicates that the weight of APRA’s supervisory activity within the superannuation industry is targeted to specific areas of focus and concern but is ultimately being cross subsidised by other trustees where it would appear such concerns may not exist,” the submission said.

“As such, the existing model of applying levies on the basis of a fund’s assets should be reviewed and AIST instead suggests a user-pays model similar to that applied by AFCA in its complaint-handling duties be considered.”

“AIST has previously called for APRA to apply a risk-weighted, proportional approach to the sectors and trustees of most concern in relation to transfer planning preparedness4 and operational risk reserves. A similar approach should be adopted in the setting of levies.”

For its part, ASFA said that the combined APRA and ASIC levies were likely to be in the order of $150 million in 2023-24 and that “this would represent an increase fo around 150% on the combined levies of 2013-14”.

“For superannuation funds, levies are ultimately funded through administration fees charged to members’ accounts. For the APRA-regulated superannuation industry, the latest annual data show that total administration fees were around $3.8 billion for 2021-22, or around 0.2 per cent of total assets (as of June 2022),” the ASFA submission said

“An estimated impact on MySuper members can be calculated (assuming that the cost of levies for funds are distributed on a pro-rata basis, according to the number of member accounts, across superannuation fund members). Given that the 14.5 million MySuper accounts represent around two-thirds of all superannuation accounts, then the amount payable by each MySuper member with respect to the combined levies for 2023-24 would be around $7 (for all MySuper products, the average administration fee is around $130 per annum for a representative member with a balance of $50,000).”

“The superannuation industry is facing increased scrutiny, including as a result of the Your Future, Your Super legislation. In particular, the performance benchmarking of MySuper products (and in time, other products) incorporates administration fees. Any increase in FISLs, or other similar industry levies, ultimately will be borne by members – as higher fees (or indirect costs) than otherwise would be the case. As such, ASFA considers it appropriate that a high level of scrutiny should apply with respect to the costs recovered from industry via the FISLs.”