APRA imposes additional license conditions on Mercer Super

The Mercer Superannuation fund has been hit with further license conditions imposed by the Australian Prudential Regulation Authority (APRA).

APRA said it had imposed the conditions on Mer Superannuation to ensure it addresses risk management and compliance management deficiencies.

The APRA announcement pointed out that Mercer Super is the trustee of Mercer Super Trust and Mercer Portfolio Service Superannuation Plan, which have approximately 850,000 members and over $70 billion in funds under management.

The risk management and compliance management deficiencies were identified as part of APRA’s ongoing prudential supervision of the trustee, which included a prudential review conducted in October 2023.  Mercer Super has subsequently acknowledged significant breaches of prudential standards SPS 220 Risk Management (SPS 220), SPS 231 Outsourcing (SPS 231) and SPS 232 Business Continuity Management (SPS 232).

Under the terms of the new licence conditions, which came into force from 27 May 2024, Mercer Super must:

• develop and implement a remediation plan in conjunction with an independent expert that addresses the deficiencies identified by APRA;
• appoint an independent third party to complete an operational effectiveness review of Mercer Super’s risk management and compliance frameworks, following the completion of the remediation plan; and
• develop a plan to remedy any deficiencies identified in the operational effectiveness review.

On completion of the operational effectiveness review, Mercer Super is required to provide APRA with an attestation from the Trustee Chair, that the remediation actions are complete and effective, and that the entity is compliant with prudential standard SPS 220, SPS 231, and SPS 232.

Commenting on the move, APRA Deputy Chair Margaret Cole said: “We have applied these conditions to drive substantial governance and risk management improvements at Mercer Super and protect the interests of its members.

“Mercer Super has experienced significant growth in recent years, in terms of membership size and assets. It is important that, when preparing to scale up operations, the trustee has the appropriate level of controls in place to ensure frameworks and systems continue to serve the needs of current and future fund members.

“APRA expects trustees to have robust risk management frameworks and to proactively manage systems and processes, including in the critical areas of business continuity management and the oversight of service providers. APRA is prepared to take strong steps, including taking enforcement action, where a trustee’s operational resilience management is substandard.”

Commenting on the APRA move, Mercer Super issued a statement acknowledging the findings of APRA’s review and saying it is fully committed to taking action on the issues raised.

“We believe our fund will be stronger and more resilient as a result,” it said.

“We had a program of work underway to accelerate the transformation of our risk management culture and practices, our business continuity planning and management of service providers.We will continue to work closely with APRA to finalise and deliver to an agreed plan.”