APRA claims fewer super funds will drive greater competition
The Australian Prudential Regulation Authority (APRA) has claimed that its activities around reducing the number of Australian superannuation funds does not have serious implications for competition.
While acknowledging to a Parliamentary Committee that this may sound counter-intuitive, APRA deputy chair, Margaret Cole said she believed Australia was “nowhere near a concentrated market in superannuation”.
What is more, Cole claimed that APRA was right to continue to press for superannuation fund consolidation because it believed smaller funds would continue to find it difficult to compete and would struggle to fund the necessary safeguard with respect to cyber risks.
Indeed, Cole said that with respect to competition in the superannuation space she was in regular discussion with the Australian Competition and Consumer Commission (ACCC) and had not so far identified any issues of concern.
The APRA deputy chair said that the regulator’s heatmaps and the superannuation fund performance test had “driven efficiencies, and part of those efficiencies is consolidation of superannuation funds”.
“That might be somewhat counterintuitive to the notion of competition, but in fact it’s squarely appropriate, we would say,” she said. “Some of the entities that are not operating efficiently and delivering good value to members should be consolidating with others that can deliver better outcomes to members.”
“We still have a landscape in super where we have 118 APRA regulated super funds as at 30 June 2022, and a small number of those, or the top 10, have roughly 50 per cent of members and assets. If you look at it the other way, 81 have less than $10 billion each in assets under management, and 55 have less than $2 billion.”
“What you have is a small number who have the large proportion of the market and a large number who are relatively rather small. We know that size and scale is an important feature of efficiency and performance overall and lower fees. We’re actually very interested in this point.”
“But clearly no-one would want to get to a world in which that market became so shrunken down that there were problems with competition. In fact, in the last four years we’ve had four new entrants. We have licensed a large player in the public domain, Vanguard, last year and over that period we’ve also had three new funds at Equity Trustees. So, it is possible to enter this market and to be efficient and a good player in enhancing competition for superannuation members,” Cole said.
She said that in the context of relatively small funds, it was APRA’s view it would be difficult for them in the future.
Cole said she believed that further superannuation fund consolidation would be beneficial in a range of ways and would “drive more vibrant competition”.
APRA’s view on competition appears to differ from the view held by the ACCC.
Perhaps APRA is unduly influenced by it’s paymaster’s associates.
I don’t think you should say the word “perhaps” in that second sentence. Guaranteed would be more apt!
When has less market participants created more competition in the history of the world in any pursuit? APRA must know something that no one else in the history of the world has ever worked out. Or they are just saying what ever they think needs to be said to achieve their biased agenda for large industry super funds..
Public servant trend setters
Is APRA just making things up these days?
How are the new Income Protection products going, that ARPA forced on the industry? That should transition nicely into AFCA complaints once people are denied claims.
There won’t be as many AFCA complaints as you think. Advisers have walked away from risk insurance rather than knowingly throw themselves in front of the bus that is AFCA.
But what would Margaret Cole know?
The only economic principle that everyone agrees is correct is supply and demand, except for APRA which now disagrees with every article of research ever printed on the topic.
We all know who butters APRAs bread. Only a fool believes that reducing the numbers will increase competition. There real agenda is to increase control and support the monopolies they are in bed with. Stop attacking small business, and giving a free run to only larger corporations.
You have destroyed the Insurance Industry. Don’t do the same to Super.
The implications on the tax take from the destruction of personal Insurance is yet to be felt by the Government. It has a lag effect, but the monetary implications are in the billions. This is a tab future governments will have to deal with. You think NDIS is expensive now, wait until the tsunami wave comes back to shore from this disaster. This is what happens when politicians think they know better than the business operators.
Don’t make the same mistake with super.