APRA denies setting super funds target
The Australian Prudential Regulation Authority (APRA) has modified its rhetoric around superannuation fund mergers, stating it has never suggested how many super funds there should be in the next five years but that is clear evidence that size matters.
APRA member, Margaret Cole has told the Conference of Major Superannuation Funds (CMSF) in Brisbane that if the super fund industry was being designed today it wouldn’t look like it does today with 141 APRA regulated funds, of which 110 collectively manage 10% of assets.
“APRA has not in fact ever said what number of super funds there will be in five years or any other time period, nor have we said that those under a certain size of funds under management will not survive,” she said. “We do say, however, that there is clear evidence from our own research to show that funds under a certain size are more likely to face sustainability challenges unless they have some other sort of competitive advantage.”
“What we also say, and will continue saying, is that members have the right to have their savings in well-governed and high performing super funds. It’s a competitive market out there.”
“Performance tests and stapling are driving change. What will determine which funds remain competitive and sustainable and which become footnotes in financial history will depend on trustees being able to identify opportunities for growth and innovation. It will depend on trustees prioritising the interests of their members with clear propositions and points of differentiation, as well as a member-centric service approach.”
“Five years ago, there were 200 APRA-regulated funds1 with assets of $1.6 trillion. At the end of last year there were 141 funds with assets of $2.2 trillion. If we were designing the super fund industry right now it wouldn’t look like it does today with 141 APRA-regulated funds, of which 110 collectively manage 10% of assets. Nor do we want to replicate the banking sector but we are very far from that. I urge you to have a good look at our technical paper on sustainability published in March. The future shape of the superannuation industry in Australia actually depends on you.”
Meanwhile as forced consolidations continue, one of the largest industry funds has just increased it’s investment fees. Less competition, more fees. Less profits for members. It’s almost back to the bad old AMP days again.
APRAs messaging to the financial advice industry and the greater public is a total mess. The clear message has been for a year or so that size matters. Then there was the total disaster of the 2020 income protection changes. Is anyone running that show?