Byres’ APRA legacy – heatmaps and consolidation

ANALYSIS

It will be lost on no one in the superannuation industry that the outgoing chairman of the Australian Prudential Regulation Authority (APRA), Wayne Byres, has overseen the most dramatic reduction in superannuation fund numbers and the means by which that was achieved – heatmaps and the performance test.

It will also not be lost on superannuation fund executives and trustees that Byers was also the chairman of APRA who saw its regulatory approach to superannuation change from one of “nudges” and counselling to one of enthusiastic pursuit of a consolidation agenda.

But it will be the introduction of APRA’s heatmaps and its role in implementing the superannuation fund performance test as part of the Your Future, Your Super (YFYS) regime which will be seen as having fundamentally changed the shape and texture of the Australian superannuation industry, reducing small and mid-sized funds and giving rise to an increasing number of mega-funds.

And while these will be remembered as significant events under his chairmanship, it must also be remembered that even today there are serious questions about the underlying methodology of the heatmaps and the performance test.

Indeed, the new Assistant Treasurer and Minister for Financial Services, Stephen Jones, has made it an early priority for the Treasurer to review the YFYS performance test and its efficacy before it is allowed to be extended to choice superannuation fund products.

Perhaps the view of Byres term as chairman has been coloured by the fact that it coincided with the efforts of successive Liberal/National Party Governments to implement policy changes which they believed would curtail the power of the superannuation industry, particularly industry superannuation funds.

The LNP’s efforts saw a succession of legislative measures put in place from Protecting Your Super and Putting Members Interests First to its final act – Your Future, Your Super which included a substantial increase in APRA’s discretionary powers.

At a time when the political environment around superannuation could best be described as “heated”, APRA was perceived as being highly enthusiastic about pursuing a reduction in the number of superannuation funds, something evidenced by the unilateral declaration by its deputy chair, Helen Rowell, that $30 billion in assets under management would increasingly be viewed as a benchmark.

Then, too, there were the speeches by Rowell’s successor in heading up the regulator’s superannuation function, Margaret Cole, suggesting the inevitable demise of smaller superannuation funds.

It is a measure of Byres longevity at APRA that his tenure covered that of three chairs of its sister regulator, the Australian Securities and Investments Commission (ASIC).

And perhaps the Government ought to have in mind the steadiness which was brought to ASIC by its current chairman, Joe Longo, when it contemplates the right person to succeed Byres at APRA.