The Australian Prudential Regulation Authority (APRA) today said that large superannuation funds were equally at risk of failure as small superannuation funds.

Speaking at the ASFAs NSW Chapter in Sydney today, APRAs Executive General Manager, Mr Charles Littrell, said that because most fund failures to date have involved smaller entities, a myth has developed that superannuation risk is a characteristic of the smaller end of the market.

"This regrettably is not the case," Mr Littrell said.

"APRA has at any one time about 20 larger funds rated high or extreme risk.. Big super funds are not exempt from risk any more than big insurance companies or big banks are exempt from risk."

These funds highlight APRAs role in regulating the Australian financial services sector. That is, to manage financial institutions that are having difficulty in prudently meeting their promises to beneficiaries, either through remediation or an orderly exit from the industry with beneficiaries funds intact.

The Government is currently considering reforms to the Superannuation Industry Supervision (SIS) Act that will strengthen Australias superannuation system. The reforms will likely include a thorough health check across the industry and APRA expects that the great majority of super funds and their trustees will come through the exercise with stronger risk and investment management plans.

Mr. Littrell said "Its important that we all accept that the total risks to superannuation are likely to be greater in the next twenty years than has been the case in the past two decades. To offset greater underlying risk, we will have to become better at managing risk."

APRA is primarily concerned with the risk associated with incompetence, inattention and criminality. A general review of superannuation entities would include the development and implementation of a risk management plan with particular emphasis on operational risk, an investment management plan, an outsourcing management plan where applicable, and a "fit and proper" test for fund managers, as well as Auditors and Actuaries.

"APRA cannot guarantee that every super fund is safe. We can guarantee that the industry overall is safe with 99% confidence. We also guarantee that APRA will make every effort to make super safer for consumers, and look forward to the industrys cooperation with our efforts," he added.

A copy of Mr Littrells speech is available on APRAs website: www.apra.gov.au.

APRA is the prudential regulator of the financial services industry including banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. It currently regulates and maintains $1.5 trillion in assets for 20 million Australians.