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APRA Deputy Chair Helen Rowell - Speech to the Australian Institute of Superannuation Trustees Chairs Forum

Rising to the Challenge

APRA Deputy Chair Helen Rowell - Speech to the Australian Institute of Superannuation Trustees Chairs Forum

Thank you for the invitation to address today’s forum.

In the words of British Prime Minister Winston Churchill: “To improve is to change, so to be perfect is to have changed often”. 

I’m not here today to advocate perfection, but I do want to talk about embracing change and the opportunities for improvement it can bring. 

The superannuation industry is a great vehicle to illustrate the point. Much about the industry has changed since compulsory superannuation was introduced in 1992, and mostly for the better. The mandatory superannuation guarantee contribution rate has lifted from 3 per cent to 9.5 per cent. The value of funds under management has soared to $2.9 trillion and is now 1.5 times Australia’s GDP. Average account balances have grown from $29,000 to $70,000 over the last 10 years and the proportion of the population with superannuation is now 78 per cent – one of the highest coverage levels in the world. 

These improvements haven’t come without challenges, particularly when it comes to enhancing the industry’s ability to better safeguard members’ money as its size and complexity has evolved. In fact, many improvements have come about precisely because the industry has been challenged. Since APRA’s prudential framework was introduced in 2013, overall governance and risk management practices and general levels of professionalism have been significantly enhanced. The number of registrable superannuation entity (RSE) licensees has also sharply declined, as smaller and less sustainable funds merged or exited, unable to keep pace with tougher regulatory requirements.

Yet in the wake of a turbulent 12 months of scrutiny, trustees face another period of substantial change ahead. Multiple inquiries have recommended a series of reforms, some sweeping, to address pockets of entrenched underperformance, insufficient transparency on industry performance and too little accountability for misconduct. 

And the sector’s regulators also haven’t been spared from criticism. In response, APRA has reassessed and revised its approach to regulating superannuation. Reflecting on the findings of the Productivity Commission, the Royal Commission and the more recent Capability Review, we are embracing the challenge to improve what we do and how we do it. We are responding with a range of changes – to our organisational structure, our strategic priorities and our supervisory approach – designed to make us an even more effective superannuation regulator with a sharper focus on the outcomes trustees are delivering members. 

In rising to the challenges set down for us, APRA will again raise the bar for trustees, and you can expect to feel a degree of discomfort. And while this will present the industry with further challenges, it also provides opportunities for trustees to improve: to strengthen their operations and, most of all, to deliver better outcomes for their members.

Structure and strategy

APRA’s overarching objective for superannuation in recent years has been to drive a culture among all trustees of continuous improvement in the delivery of member outcomes, irrespective of the size of their funds. But the clear message to emerge from the Capability Review was that we needed to pursue this agenda much more forcefully. The most tangible evidence of our determination to meet that challenge is APRA’s updated Corporate Plan, and the changes to our organisational structure and supervision approach that will deliver it. 

APRA’s 2019-23 Corporate Plan, released in August, identified improving outcomes for superannuation members as one of our top four strategic priorities. Having already embarked on a program of work in 2017 that was squarely aimed at boosting member outcomes, we will be intensifying this focus, going further and faster than we have to date, especially in targeting the persistently underperforming industry tail. Our plan also includes a major uplift in our superannuation data collection, and enhanced transparency on industry performance and supervisory actions. 

Stepping up our focus on member outcomes, without losing sight of our traditional mandate of financial strength and stability, has required us to consider how to fulfil our mandate more effectively and efficiently. From December 1, we will have transitioned to an industry-focused organisation structure for supervision, in line with the recommendation of the Capability Review. For the first time, superannuation will be overseen by a dedicated supervisory division, under the leadership of new Executive Director Suzanne Smith. Changing to an industry-aligned model will enable us to develop more in-depth expertise and greater coordination between our supervisors and risk specialists, particularly as we continue to increase our use of industry-wide thematic reviews. The Investment Risk team and our Members Outcome team will be part of the new Superannuation Division, further strengthening and deepening our supervision focus on these areas.

The impact on trustees

Much of the debate following the Productivity Commission’s report on the efficiency and competitiveness of the superannuation industry has been on the merits of the “best in show” concept, and how the best performing funds would be identified. APRA’s focus, on the other hand, has been at the other end of the spectrum: weeding out the industry’s underperforming tail, where the most damage to members’ interests is done. The bulk of superannuation funds from all sectors perform well – as the Productivity Commission noted “the majority of members and assets in the system are in products that have performed reasonably well”1. However, too many members are invested in funds that consistently deliver sub-par outcomes, potentially reducing members’ retirement incomes by hundreds of thousands of dollars over a working life. A lack of transparency and the complexity created by the sheer number of products and options on offer has hindered member engagement, and made it much harder to assess performance across the full spectrum of the industry. By collecting and publishing a wider range of more granular data, APRA will make it much clearer to all stakeholders which trustees need to lift their game, and where.

By now, all trustees should be well progressed towards the implementation of SPS 515 Strategic Planning and Member Outcomes from 1 January next year. The legislated member outcomes assessment, complemented by APRA’s Business Performance Review (BPR), are aimed squarely at raising awareness among trustees regarding where they sit in comparison to the rest of the industry and relevant benchmarks. For some trustees, the path to self-discovery will be a confronting one, as it becomes clear they are responsible for funds, products and options that are underperforming, and therefore have an obligation to lift their game or exit the playing field.

Where areas of underperformance are identified, SPS 515 requires trustees to take steps to address them. Those trustees that are willing and able to rise to the challenge will enhance the retirement incomes of their members, as well as help secure their continued participation in the industry. On the other hand, those that are unwilling or unable to rise to the challenge will find APRA intensifying the pressure to improve the member outcomes they deliver – and we have new tools and powers that we can exercise to make clear that change is not optional.

Feeling the heat

The measure that has attracted the most attention across the industry and media is APRA’s plan to publish heatmaps providing our assessment of performance for all MySuper products. This initiative is designed to provide clearer, simpler insights into how trustees are performing in terms of member outcomes – initially for MySuper, and expanding to choice products and options over time. We’ve previously flagged the four areas the heatmap will cover, namely investments, fees and costs, sustainability and (in due course) insurance. 

We are in the process of finalising all the details of the methodology and measures we will use for the heatmap, and exactly how we will present them. But what I can share with you is that the heatmap will not include a single, overall product level assessment. Rather, the heatmap will display performance across a range of metrics in the areas of investments and fees and costs, and provide indicators of trends in sustainability measures.

The heatmap is intended to be a starting point for member outcomes and performance assessment. Trustees will be expected to build on the heatmap and consider a broader range of metrics appropriate to their operations, and to also consider performance at a cohort level. As we’ve said in our guidance supporting SPS 515, assessment at the product level may mask performance issues at the cohort level. 

The heatmap will also inform APRA’s supervisory intensity and approach, together with the rich sources of additional quantitative data available, and also the qualitative information and analysis we derive from our supervision activities. 

It is also important to note that the heatmap presents data already largely published by APRA, albeit in a different format. Over many years the industry has been using available data in a range of different ways to highlight relative stronger and poorer performance across segments of the industry. And so it’s somewhat disappointing to us that the prospect of APRA presenting already publicly available data with its own lens on performance is generating a considerable amount of vocal pushback. 

We are well aware of the difficulties of comparing funds with different member profiles or investment strategies. That’s why the final design of the heatmap will be the culmination of more than a year’s considered analysis that seeks to incorporate like-for-like comparisons and appropriately reflect these differences. To ensure our methodology is robust and reliable, we have also engaged external consultants to validate our approach. Our aim is to find the optimum balance between presenting the data so that it can be understood by a broad audience, but is not so simplified as to be meaningless or misleading. We are well aware of the scope for misuse and misrepresentation and are considering that in how we design, present and explain the new system. But we aren’t allowing difficulty to be an excuse for inaction.

Beyond any unease about benchmarks or methodology, we suspect the real concern for many trustees is the prospect of having their performance publicly exposed in a simpler, credible and insightful way by APRA – especially among those with an inkling that their place on the heatmap will be at the hotter end of the colour spectrum. We don’t resile from the fact that the heatmap is designed to challenge the trustees of underperforming products to consider where their performance needs improvement, and to take action in response – helped by their APRA supervisor where needed. 

The heatmap will present the data in a way that can be broadly understood by those who don’t have a degree in applied mathematics and statistics and won’t require a major in spreadsheet analysis to interpret. Although they aren’t specifically designed for consumers to use for investment decisions, making additional information available will address many of the concerns raised by the Productivity Commission. Given the important role of the APRA-regulated superannuation industry, it’s difficult to argue that stakeholders are not entitled to be given a clearer picture of who is, and who is not, doing a good job with members’ money. 

One legitimate complaint is that the heatmap will not, at first, cover the choice sector. This is something we intend to rectify once we start expanding our superannuation data collection with sufficiently reliable and high-quality data on this sector of the market. This brings me to another of the ways APRA intends to challenge the superannuation industry: we are embarking on a substantial uplift in both the breadth and granularity of the data we collect. As APRA Chair Wayne Byres noted last month, requests from regulators for more information tend to produce complaints about regulatory burden, but the current data collection has been deemed insufficient, and so the status quo is not an option.

An enhanced superannuation data collection will provide the data-driven insights that will support APRA’s supervision, but it would be short-sighted for trustees not to recognise the upside for them in having access to a clearer picture of both their own business and their broader operating environment. In keeping with the “open data” philosophy, there’s nothing to stop trustees developing their own data analysis tools and leveraging the advantages these might offer. As Wayne also noted, “if in this day and age a trustee cannot reliably, accurately and quickly provide information on assets, returns, fees and costs for all their products across a range of dimensions…one wonders how they will meet heightened standards for assessing the outcomes being delivered for their members.”

Before concluding, I’d like to say a few words about some of the other areas of focus for APRA, which should therefore also be top of mind for boards. Our March 2019 letter to industry indicated that, in addition to the areas I have already spoken about today, APRA will also be focusing on trustee board capabilities and culture, risk governance, conflicts of interest, accountability and remuneration. We are progressing our work in these areas through a mix of thematic reviews, strengthened prudential standards and a range of supervisory activities. In each area we will be looking to see evidence that frameworks and policies are effectively implemented and delivering effective outcomes. That too should be the focus of you as trustees – what are the proof points that demonstrate that to you, and also to APRA? Remember the well-coined phrase: “show me, don’t tell me!”


Let me finish with another political quote, this time from a former Australian Prime Minister: “Life wasn’t meant to be easy.”

Running a superannuation fund is challenging, and – given what’s at stake – so it should be. When a system is responsible for managing trillions of dollars of savings that millions of Australians will rely on in retirement, its standards must necessarily be high, and robustly enforced by regulators that are up to the task. If the past year has been testing in terms of scrutiny and occasional criticism – of both the industry and APRA – the coming 12 months will bring further challenges as APRA and the industry implement the reforms needed to further improve outcomes for superannuation members. Trustees can expect to feel a degree of discomfort as APRA increases pressure on underperforming funds through enhanced data, greater transparency, a stronger prudential framework, more intense supervision and a lower threshold for taking formal enforcement action. But only by setting stretch goals and feeling a bit uncomfortable can any business ¬– or regulator – expect to improve its operations and the outcomes it delivers.

Trustees that view these heightened requirements as simply a burden to be endured are more likely to find themselves under pressure from APRA to justify their continued licence – in both senses of the word – to manage members’ retirement savings. A smarter alternative is for trustees to embrace the opportunities that change provides – to genuinely reflect on their performance, take decisive action to address areas of weakness, capitalise on the insights flowing from enhanced transparency, and emerge stronger and more effective as a result.

For the sake of your members’ interests, I hope you rise to the challenge.


1. Finding 2.2, Superannuation: Assessing Efficiency and Competitiveness – Inquiry Report, Productivity Commission, 10 January 2019, p51.

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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.