APRA admits ‘nudging’ out funds that pass performance test

Mike Taylor

Managing Editor/Publisher, Financial Newswire

12 October 2022

The Australian Prudential Regulation Authority (APRA) will not be filing a submission with respect to the review of the superannuation fund performance test but is actively nudging funds out of the industry.

However, the regulator said that even where some, smaller funds had passed the performance test it would continue to “nudge” them to consider their futures.

In what will be interpreted as a significant step back on the policy front by the regulator, a Parliamentary Committee was told that while APRA is engaged with Treasury in terms of its approach to the performance test review, its involvement will not extend beyond that.

APRA member in charge of superannuation, Margaret Cole told a hearing of the House of Representatives Standing Committee on Economics that, “ultimately, any changes will be a matter for the Government”.

“And we will work within that,” she said in answer to questions.

Asked by NSW independent, Allegra Spender whether there were any concerns about whether there was a danger of excess superannuation fund consolidation.

APRA’s Cole said that while there had been significant consolidation, particularly over the past two years, there still existed a significant number of trustees in the industry and cited 212 in 2013 which had reduced to 160 in 2021.

“Its still a large number and we also find there’s still a large number of small funds remaining in this industry that have relatively a small number of members and relatively a small amount of money under management,” she said.

“So I think in terms of ongoing consolidation over the foreseeable future I don’t think we feel there are going to be structural issues or competition issues any time soon and I don’t think that is a concern of the regulators,” Cole said.

“I think more of a concern really is that we’ve consolidation resulting from those who have failed the performance test, and rightly so, but there is this question of the sustainability of others who have passed the performance test for the time being but on our observations and calculations there are some who don’t look like they’ll have a long-term sustainable future,” she said.

“We encourage those trustees to think about the future and the importance to members of good governance and good returns,” Cole said.

“So we will continue, even where they don’t fail, to nudge them to consider their options for the future,” she said.