APRA deems super sole purpose test past use-by date
The Australian Prudential Regulation Authority has announced it is retiring the guidance it has been providing around the superannuation funds sole purpose test.
The regulator said that the guidance, first issued in 2001, was no longer relevant.
The announcement came as APRA released a discussion paper dealing with SPS 515 covering Strategic Planning and Member Outcomes which the regulator said represented a core standard for superannuation.
It said that Prudential Standard was designed to ensure superannuation funds had robust business operations and were held to account to ensure their strategies and decisions delivered outcomes in the best financial interest of members.
“Since SPS 515 came into effect in 2020, the operating environment has changed markedly. Not only have there been changes to the legislative settings for superannuation, but industry consolidation has continued, implementation challenges in strategic planning have emerged, and key enhancements have been made to other areas of APRA’s prudential framework,” the APRA consultation paper said.
“SPS 515 goes to the heart of what trustees need to do. Updating the standard will ensure trustees have robust business operations and are held to account to deliver outcomes that are in the best financial interests of their members,” APRA deputy chair, Margaret Cole said.
The proposed enhancements to SPS 515 include revisions, in particular, to:
- ensure expenditure requirements better align with the best financial interests duty and, in relation to the retirement phase, to support the retirement income covenant;
- reflect supervisory observations on areas where the industry needs to lift the bar, with a particular focus on management of financial resources; and
- improve the management of risks to members being transferred across funds, in the context of heightened transfer activity.
Cole said the sole purpose test circular, published in 2001, had been created for a different generation of superannuation trustees.
“The circular was designed more than 20 years ago for a larger number of less sophisticated trustees. It offered general guidance and had no legal status or effect. Trustees are operating more mature businesses today and are well placed to make decisions consistent with their legislative duties.”