Letters

Expenditure outcomes: putting members' best financial interests first

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To: All RSE Licensees

As Australia’s prudential regulator, APRA has joint statutory responsibility for administering the best financial interests duty (BFID). BFID is a statutory requirement in s52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth) which requires RSE licensees to perform their duties and exercise their powers in the best financial interests of beneficiaries.

Members’ balances at retirement age are inherently shaped by the stewardship, governance and decision-making of their RSE licensee. The expenditure decisions made by RSE licensees regarding how funds are spent may have a lasting impact on members’ retirement outcomes. It is therefore crucial that all expenditure decisions are made with a clear and demonstrable focus on members.

In this context, APRA’s letter of October 2024 advised RSE licensees that it would be intensifying scrutiny of fund-level expenditure partly informed by SRF 332.0 Expense data.¹ APRA’s objective with this work is to promote improved industry practices to support better outcomes for members.

Consistent with that letter, APRA has sought information from 14 RSE licensees, of varying scale and business models where APRA observed comparatively higher levels of expenditure or where the member benefit of specific expenditure was not immediately apparent. As part of this process, APRA has reviewed thousands of documents relating to discretionary expenditure, marketing and connected entity spending.

Ultimately, improved decision making by RSE licensees in line with their BFID obligations will lead to better outcomes for members. As such, APRA has analysed contributing factors of expenditure outcomes, including decision-making and conflicts of interest, expenditure management frameworks, and monitoring and reporting.

Where APRA has identified opportunities for individual RSE licensees to improve practices, APRA has communicated this directly to these RSE licensees and will continue to monitor as part of ongoing supervision.

This letter sets out APRA’s initial observations, examples of better practice and areas for improvement to support RSE licensees’ compliance with their legal duties and achievement of better outcomes for members. This continues to be an area of supervisory focus for APRA given the impact on member outcomes.

Expectations

APRA’s high-level expectations include:

A robust decision-making approach with clear links to Strategic Objectives and expected financial outcomes for members (e.g. estimated dollar value benefit or saving);
A comprehensive expenditure management framework with clear definitions and expectations, thresholds and approval requirements inclusive of a risk assessment;
Periodic monitoring that utilises member outcomes focused success metrics to measure improved or declined financial outcomes to members, and acting on insights further to these metrics; and
Reporting that is supported by evidence and data with clear links to member impact.

APRA’s detailed observations are set out in the attachment below.

Next Steps

All RSE licensees are encouraged to review their practices considering the better practice examples and observations below holistically and take action to address any deficiencies.

APRA notes the updated SPS 515 and related guidance in SPG 515 ² commence July 2025. The new SPG 515 notes APRA’s view that better practice is for RSE licensees to obtain an attestation from accountable senior executive management on expenditure management.

Where APRA identifies practices which fall short of legal requirements, APRA will utilise the full range of its powers to hold an RSE licensee accountable.

Yours sincerely

Margaret Cole
Deputy Chair

Attachment: APRA’s Observations

Better Practice	Areas for Improvement
Decision-making
Sound decision-making supported by robust business cases, underpinned by data that outlines measurable objectives and expected outcomes. Clear links between an RSE licensee’s Strategic Objectives and expected financial outcomes for members, including an assessment outlining the impact if the expenditure did or did not occur, benchmarking, and any other alternatives that have been considered. Decisions to enter into agreements or undertake significant expenditure were put to a committee, reflecting oversight and transparency of the decision-making process. Standardised processes with robust documentation were more thorough, consistent and able to measure the expected benefits to members from entering an arrangement.	Lack of rigour when entering into agreements and in some cases governance concerns with the level of scrutiny applied to new or ongoing arrangements. Decisions to proceed with the contracted expenditure not consistently demonstrating a clear rationale or alignment with measurable member benefits. Emphasis on industry positioning or the activities undertaken by peers rather than delivering outcomes to members. This approach undermines the intent of BFID. In some cases, RSE licensees did not have a standardised process when entering into agreements resulting in inconsistent, and at times, inadequate evaluation processes.
Expenditure management frameworks
An integration of comprehensive risk management processes that reflects proactive management of potential risks associated with contracted expenditure. Clearly defined expenditure types and categories supported by practical examples, pre-determined financial thresholds and documented approval requirements. This enabled more consistent and transparent governance and accountability.	Sub-optimal policy framework and/or design: Reliance on a combination of several policies or procedures that lacks specific criteria for interpreting when contracted expenditure may be consistent with BFID, limits the effectiveness in guiding decision-making and ensuring compliance. Expenditure policies should set out criteria to assist RSE licensee employees to understand where contracted expenditure may be inconsistent with BFID, the sole purpose test or the sound and prudent management of their business operations. Lack of robust governance and oversight of fund expenditure / decisions not supported by an expenditure management framework, aligned to SPS 515 and associated guidance.
Monitoring and reporting
Evidence-based and regular monitoring and reporting processes that assessed whether outcomes were being achieved through measurable and member-focussed success metrics. RSE licensees demonstrate how an increase in membership numbers through certain expenditure activities led to a reduction in fees, providing tangible evidence of improved financial outcomes for members. Outcomes were regularly presented to the relevant Committee and/or Board, accompanied by data-driven recommendations reflecting stronger governance practices. Outcomes delivered to members through expenditure decisions were integrated into an RSE licensee’s Business Performance Reviews (BPRs), reinforcing alignment with Strategic Objectives and enhancing accountability.	Poor use and adoption of quantitative metrics to assess whether financial benefit was being delivered to members, particularly in relation to the services provided by third parties. Undue reliance on the performance reporting provided by third parties or service providers without applying judgement to determine if an RSE licensees’ own success measures were being met. In some cases, performance was not tracked against the original metrics of an agreement. Some RSE licensees had entered into agreements with providers prior to the commencement of BFID and had not revisited or reviewed these arrangements since. The failure to review legacy agreements represents a significant compliance risk and reflects a lack of responsiveness to evolving requirements. Reporting should contain clearly defined review triggers and where expenditure is not achieving its intended outcomes, it should be ceased or appropriately modified.

Footnotes

¹ See, APRA increases transparency with enhancements to annual superannuation publications

² Prudential Standard SPS515 Strategic Planning and Member Outcomes (SPS 515) and Prudential practice guide SPG 515 Strategic Planning and Member Outcomes (SPG 515).

2025