As we expected post the Royal Commission, the rules are being refined and all super funds need to jump higher if they want to stay in the race.

APRA has recommenced seeking more information from super funds for its Superannuation Data Transformation project – so that it can include choice products and investment options in an expanded heatmap. This is just one of the tools the regulator will use to foster a “superannuation trustee culture of continuous improvement, including addressing underperformances in the superannuation industry” (as outlined in its recently updated corporate plan).

While a one-year deferral for data collections is still in play, super funds are asked to respond to APRA’s recently released consultation pack (on a voluntary basis).  Submissions and pilot data are to be submitted by various dates over the next eight weeks ahead of finalising the nine reporting standards.

The consultation pack is made up of topic papers, draft reporting standards and data collection templates in regards to:

  • Fees and costs: expanding APRA’s collection of fee and cost disclosure data to choice products and options, and providing key forward-looking drivers of member outcomes for all superannuation products;
  • Insurance arrangements: collecting more data on insurance policies including premiums, claims payments and processing stages, as well as outcomes for members across different member cohorts, including occupation categories;
  • Expense reporting: utilising a look-through approach to superannuation fund expenditure and establishing more granular and consistent reporting categories to enable more effective analysis and assessment of levels and types of expenditure; and
  • Asset allocation: expanding the reporting of asset allocation data to choice products and options, and collecting more granular and consistent MySuper data to provide a more complete picture of superannuation investments at the investment option level.

This is going to be complex and time-consuming for super funds – but also vital to their ongoing viability and marketability. It will be particularly challenging for super funds with large numbers of Choice products and investment options; more than 40,000 of these are in retail funds.

While super fund involvement in this stage is voluntary, it soon won’t be, and funds will have to use this information to fulfil existing regulatory requirements such as their Business Performance Reviews and Member Outcomes Assessment. Just as importantly, the data collected will determine how funds are rated in the APRA league tables – the Heatmaps.

Some funds have chosen to allocate responsibility for this stage to a dedicated team with reporting expertise, some are divvying it up between topic areas, whilst others haven’t yet started to address these requirements.

This stage will be demanding for both funds and APRA alike:

  • the Insurance paper raises issues about consistency and comparability that have long troubled APRA and it’s not clear that APRA will be able to solve them now;
  • the Expense paper doesn’t resolve the issue of materiality – how this is addressed will make a big difference to how big a project this is; and
  • the Asset allocation paper raises many issues which funds will struggle to manage.

Super funds are also required to simultaneously address policy and technical questions raised by the topic papers. For example, will Asset allocation reporting make funds look risker? And will APRA’s insurance categories easily align to all funds?

All this, in the midst of a pandemic, is certainly going to test participants in the race. However, with good support and coaching from companies like IQ, super funds will recognise the criticality of this work and put in place comprehensive and cohesive project plans that will jump over the multiple hurdles and meet next year’s deadline with a winning celebration.

Let’s just hope there’s time for a break, and for the sweat to evaporate, before more hurdles are added to the track!

By Katherine Forrest (Head of Capability)