APRA won’t name and shame funds on super expenditures

The Australian Prudential Regulation Authority (APRA) will today publish its inaugural superannuation expenditure data but it has already declared it will not be ‘naming and shaming’ particular funds.

The data will show that total industry expenditure was $10.83 billion for the period, with investment-related expenses accounting for more than 33% of spending, advice for 11% and administration and other expenses for 53%.

APRA deputy chair, Margaret Cole said that while the regulator had contemplated publishing tables of the top 10 biggest spenders across categories it had ultimately decided against it,

“The main flaw with that idea was that it may be perceived as an exercise in “naming and shaming” trustees for levels and types of expenditure that might well be justified and appropriate,” she said.

“The scale of expenditure in a particular category is not necessarily a measure of whether the expenditure is good, bad or appropriate. Some very large items of expenditure may be justifiable as being in the best financial interests of members. Conversely, even relatively small items of expenditure might not be OK.”

“We also considered whether we should ‘blacklist’ certain types of expenditure, say, for example, advertising or payments to unions. Again, we decided against it,” Cole said.

However, she suggested that if something looks like duck, swims like a duck and quacks like a duck, then it is probably a duck.

“The measure of whether expenditure is appropriate under BFID [Best Financial Interests Duty] is not whether it passes the “pub test”, although trustees might well have good reason to take public opinion and reputational considerations into account,” Cole said. “The measure is whether trustees can demonstrate that the spend is in the best financial interests of its members. Having strong metrics that link spending to member benefit is an effective way of doing this.”

She said that APRA would be utilising the data to look for expenses where member benefit is not immediately evident or may not be reasonably justified.

“We will be prioritising expenditure where there is potential to improve practices and outcomes across the industry, or where we have market intelligence or where there is significant public interest.

“The areas we will target initially include – but are not limited to – discretionary expenditure categories such as travel, entertainment and conferences.

We will also focus on:

• relative and absolute size outliers, including consideration of impact to members; and
• particular types of payees and payments where benefit to members is not immediately apparent.

“Where deficiencies are identified, APRA will require that trustees make the necessary improvements, which may include APRA enforcing rectification measures where warranted. In line with our enforcement approach, APRA will typically make enforcement actions public.”