The Government announced its intention on 30 August last year to amend the SIS legislation to ensure that all superannuation funds offering lifetime and life expectancy pensions are subject to an appropriate level of prudential supervision.
After consultation with the superannuation industry, APRA moved today to ensure that superannuation funds which pay pensions are subject to appropriate prudential standards.
APRA used its powers to modify the Superannuation Industry (Supervision) Regulations to require superannuation funds paying pensions to produce an annual actuarial certification that there is a reasonable probability those pensions will continue to be paid under the governing rules of the funds.
The market for superannuation pensions has, until now, been restricted to relatively secure superannuation funds arranged by life companies or sponsored by large employers. A broader range of superannuation funds have entered the market following changes to the Social Security asset test exemption for income streams on 20 September 1998. This resulted in a situation where APRA had concerns that some funds might not have the capacity to ensure payment over the long term of such pensions.
The modification alters the definition of 'defined benefit fund' to include all funds paying pensions (with the exception of funds paying allocated pensions and funds providing pensions only through the purchase of annuities issued by registered life insurance companies). Funds subject to the new requirements must, among other things, have annual actuarial investigation and certification of a reasonable probability that the pensions will be paid under the governing rules of the funds. APRA has discretion to vary the annual actuarial investigation and certification period from one to three years for some affected non-excluded funds.
APRA expects actuaries preparing annual certificates to follow relevant professional standards.
The Modification Declaration, Explanatory Statement and Regulatory Impact Statement are available in PDF format below:
Modification Declaration (PDF, 21 kB).
Explanatory Statement and Regulatory Impact Statement (PDF, 42 kB).
For further information contact:
(02) 9210 3126