The Australian Prudential Regulation Authority (APRA) has put underperforming super funds on notice, saying it will investigate the worst funds and bring them into line.
The top 10 MySuper funds, which delivered an average annual return of 8.9 per cent over the last two and a half years (to December 2016), have regularly outperformed the bottom 10, which only returned an average of 5.4 per cent annually.
Speaking at the annual Conference of Major Superannuation Funds on Friday, APRA deputy chair Helen Rowell issued a warning to underperforming funds.
“The bottom performers we look at pretty closely and we are going to be having conversations with them,” said Ms Rowell.
“Operating in what is an increasingly complex environment, trustees need to be aware of and proactively considering how they will respond to the challenges that will arise, now and into the future, to ensure their funds remain ‘fit for purpose’.
“That means having the scale, capacity and resources to deliver on their obligations to members on an ongoing basis, which requires sound planning, taking into account a range of plausible scenarios, disciplined monitoring of progress against those plans, and taking prompt corrective action when underperformance is identified. Not all trustees are doing this adequately.”
While APRA has not declared exactly which funds it will investigate, it is believed that some of them may be not-for-profit funds.
Ms Rowell has also reproached some funds for “laxity of governance and oversight” and for spending on “questionable expenditure”, such as overseas trips for board members or paying for spouses to attend conferences.
“I always raise an eyebrow at the need for the full board, for example, to travel internationally to talk to investment experts, given the frequency with which investment experts come down here, and whether it’s actually the full board that needs to go,” said Ms Rowell.
She said this inappropriate spending could have a negative effect on members’ funds over time.
Read more at APRA
How is your super fund performing? Do you expect it will be targetted by APRA and, if it is, would you expect the performance to improve?