Best endeavours sometimes not good enough
Superannuation fund expenses remain a contentious item with a consultation about to kick off with the regulator.
Like it or not, the debate over super fund expenses, how much should be disclosed and in what form, is not going away anytime soon. APRA is about to begin further consultations with the industry following the rollout of its new Expense Reporting Standard in June 2021.
It appears that a lot of funds – the RSEs, as required by the regulation – have availed themselves of the ‘best endeavours’ concession in their reporting, meaning that being unable to provide the precise detail in APRA’s preferred manner, they made their best endeavours to do so. It is understood that APRA and Treasury are looking for further improvements in transparency of expenses reporting, under the Superannuation Data Transformation (SDT) program.
Fund expenses became a politically charged debate prior to last year’s change of Government and while the heat has subsequently dissipated, the new Government remains just as committed to the ideal of greater transparency in general. This includes better disclosure of all information relating to a fund’s operations, unless non-disclosure is imperative on grounds of competitiveness.
Our view at nuj is that funds should get behind the SDT program, launched by APRA in November 2019 with the first reporting period to June 2021, because we think it will also benefit funds through improvements to their own operations.
For this to happen, though, APRA also has to play its part and provide a similar flow of worthwhile information back to the industry. Nuj calls this free flow of information between APRA and super funds the ‘Super Data Highway’. We believe that this road, which is a dual carriageway, will lead to better member outcomes.
The Government, through the Assistant Treasurer and Minister for Financial Services, Stephen Jones, sees the three key areas requiring greater transparency in fund operations as performance, governance and expenses.
Changes to performance disclosures are well underway, having been introduced by Coalition Government’s Your Future Your Super legislation. The Labor Government’s review of the performance test is well advanced, having suspended its scheduled introduction on investment ‘choice’ options shortly after gaining office.
Industry feedback on the YFYS choice performance test has been received and it is understood that APRA’s first heatmaps for fund choice options are due for imminent release. APRA and Treasury are working through the industry feedback received to legislate any proposed changes for the reintroduction of a test on the choice options in coming months.
On the matter of better transparency in fund governance, this will be initially covered through a requirement for ASX-style annual reports to be published annually. Treasury is looking for super funds to publish the annual reports for the current (2022-2023) financial year. The reports are expected to be expanded upon in future years.
Funds have produced annual reports for many years but, it has to be said, some of them are a lot more detailed than others. And some are a lot more readable than others. Funds could probably do worse than have a look at the annual reports of the top 20-or-so ASX-listed companies for guidance. That seems to be the type of information, and its presentation, that the Government is looking for from super funds.
At nuj, we have always been a massive supporter of the free flow of information, in both directions, to allow super funds to take action to improve their decisions. Those decisions should also set the funds apart. They are what endears their members to them. They are the things that enable members to have a better connection with their super funds and, hopefully, build a better connection between themselves and their retirement goals.