APRA’s excessive fee warning on super contingency reserves
Superannuation funds should be diligently exploring and exhausting all avenues for raising financial resources before hitting members with fees to build a contingency reserve, according to the Australian Prudential Regulation Authority (APRA).
While acknowledging the ability of super fund trustees to build contingency reserves, the regulator has told Senate Estimates that the fees charged by funds should not be excessive.
APRA had been asked by NSW Liberal Senator, Andrew Bragg what would happen if a major fund was hit with a regulatory fine and its contingency reserve was not sufficient to pay the fine.
APRA’s formal answer to the question made clear that in such an event superannuation funds would need to find the money elsewhere, or file for insolvency.
“If a trustee incurred a fine/penalty that exceeded the amount in its reserve, the trustee would need to obtain an alternative source of capital to pay the fine/penalty. If a trustee was unable to find an alternative source of capital, the trustee would need to file for insolvency and a replacement trustee or acting trustee would need to be appointed,” the regulator’s answer said.
APRA pointed out that from 1 July this year Prudential Standard 515 (SPS 515) will require superannuation fund trustees to have controls to ensure they are in a sound financial position including a capital management plan to govern the permitted use of financial resources held at the trustee company level.
“SPG 515 outlines APRA’s expectations where fees are charged to contribute to a trustee reserve, including that the amount generated would not be excessive, and that the level would be transparent and evidence-based,” it said.
“SPG 515 further outlines APRA’s expectation that trustees should diligently explore and exhaust all other avenues for raising financial resources before building a financial contingency reserve by charging fees.”
What other revenue avenues APRA ?
Industry Super Funds charge multiple HIDDEN COMMISSIONS, for Life Insurance & for Intra Fund Advice.
How about a new Hidden Commission as APRA let the others occur with zero action.
This is the stupidity of the bureaucrat class writ large. They’ve never had to procure revenue in their life. It comes from the mystical tax god in the sky and all bills, rent, insurance and wages magically get paid.
If it doesn’t come from the members where does it come from you morons? Non government sector has no magical money tree like bureaucrats, most of whom wouldn’t know an honest days work if it bit them in the arse.
“And that the level be transparent and evidence based”. But if the trustee gets the amount wrong they’ll be in trouble with apra. Sooo, maybe hold more than you need and collect more money. This regulatory uncertainty provided by the regulator further adds to costs and risk of over protection/recovery.
Another concept for blissfully ignorant regulators to get their tiny brains around.
They need capital go to the markets, List that’s what why all the mutuals did back in the day. Would that be Ironic ISA for profit!!
Maybe APRA can assist with funding from their Xmas Party slush fund?