Funds face pressure on Retirement Income Covenant
The Australian Prudential Regulation Authority (APRA) has signalled a significant audit of how superannuation funds are delivering on their Retirement Income Covenant commitments.
APRA chair John Lonsdale signalled the move to Senate Estimates referencing it in the same order of importance as the Your Future, Your Super superannuation fund performance test the next iteration of which is due to be published in August.
The APRA audit will be the first in a succession of annual reviews of the Retirement Income Covenant ahead of a triennial review scheduled to be held in 2025.
It comes against the background of Treasury last year issuing a report on the RIC in which it said that it was confident it would not represent a mechanism via which superannuation funds would stray into the area of delivering personal financial advice
Both APRA and the Australian Securities and Investments Commission (ASIC) signalled in June last year that they would be undertaking an annual outcomes assessment of retirement income products, together with assessing the initial impact of retirement income strategy as part of business performance review and whether superannuation funds have managed to capture annual review findings in business plan.
Addressing Senate Estimates yesterday, Lonsdale described it as a “thematic review”.
His comments follow on from APRA’s earlier discussion of its priority areas for 2023 in which it said that, in collaboration with ASIC, it would be conducting thematic reviews of how trustees have implemented the retirement income covenant within their business strategies and operations.
It said APRA aimed to finalise its guidance on investment governance by the middle of this year following the conclusion of a consultation process in March and finalise the guidance in the second half of the year.
“APRA also intends to release proposed revisions to its guidance on strategic planning and member outcomes for further consultation with the goal of delivering quality outcomes for members with consultations scheduled for the whole year,” it said.
Funny that they are auditing something that had wishy washy guidelines in the first instance.
There was a lot of “consider ….” It was very short on implementation except where already legislated.
https://www.apra.gov.au/implementation-of-retirement-income-covenant
This is a perfect example of regulatory overreach.
Funds will now be held to account for something the regulator didn’t know how to implement.
No wonder APRA & ASIC fees are soaring with very little evidence to show value coming from the fees.
Also APRA finally examining union involvement with super:
“During a Senate Economics Committee session yesterday, it was revealed that APRA is investigating the financial relationships between superannuation funds and unions” another FS article worth reading where Senator Bragg is pushing for anti-corruption in these union funds.