The regulatory cost gouge – up 150% over 10 years

Levies paid by the superannuation industry to fund regulation have increased by 150% over the past decade and have significantly impacted member fees.

Faced with another round of levy increases to fund the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investment Commission (ASIC) and the Australian Taxation Office (ATO) superannuation funds have called on the regulators to better explain why their costs are going and what the money is being spent on.

The call has come at the same time as APRA has been warned that the costs associated with its data collection risked placing superannuation funds at risk of breaching their members best financial interests duty.

The superannuation funds are pointing out that the increasing levies are driving up administration cost which ultimately drives up costs to members and impacts the APRA heatmaps and the performance test resulting from the Your Future, Your Super legislation.

In a submission filed with the Federal Treasury, the Association of Superannuation Funds of Australia (ASFA) has pointed out that the increases covered in the latest Financial Institutions Supervisory Levy (FISL) estimates and questioned what the money is being spent on.

“The superannuation industry is facing increased scrutiny, including as a result of the Your Future, Your Super legislation. In particular, the performance benchmarking of MySuper products (and in time, other products) incorporates administration fees,” the submission said.

“Any increase in FISLs, or other similar industry levies, ultimately will be borne by members – as higher fees (or indirect costs) than otherwise would be the case. As such, ASFA considers it appropriate that a high level of scrutiny should apply with respect to the costs recovered from industry via the FISLs.”

The submission pointed to the fact that latest FISL estimates proposed by the Treasury encompassed a 6% rise with respect to APRA, a 10% rise with respect to the ATO and needed to be read in association with the rises expected with respect to the ASIC levy.

“For 2022-23, ASFA estimates that combined levies are likely to be in the order of $150 million. This would represent an increase of around 150% since 2013-14,” it said.

“For superannuation funds, levies are typically funded through administration fees charged to members’ accounts. For a representative member (balance of $50,000), ASFA estimates that the amount payable with respect to combined levies would be around $6. Given that combined levies have increased by around 150% since 2013-14, the equivalent amount payable for a representative member would have been less than $3 (in today’s dollars) in 2013-14.”