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APRA moves to strengthen transfer planning in superannuation

The Australian Prudential Regulation Authority (APRA) has begun consulting on a series of measures to enhance planning by superannuation trustees in the event they need to transfer members out of – or into – their fund.

In a discussion paper released today, APRA outlined proposals aimed at ensuring trustees prepare for, manage and execute successor fund transfers more smoothly and efficiently.

The proposals have been prompted by a period of heightened transfer activity in the industry, which has been amplified by APRA’s focus on combating underperformance through measures including the annual performance test and heatmaps.

While APRA strongly supports further industry consolidation, APRA Deputy Chair Margaret Cole said successor fund transfers often ran into problems that eroded the benefits to members.

“One of the best ways for trustees to improve outcomes for their members is through a merger that delivers the benefits of increased scale, or by transferring them to a better performing fund.

“The transfer process itself, however, isn’t always straight-forward, and that can be exacerbated when a lack of robust planning puts members at risk of a protracted, costly or failed transfer that fails to improve their outcomes.

“With industry consolidation likely to increase in coming years as poor performers and those with sustainability issues exit, and strong performers seek a competitive edge, it’s important all trustees are prepared to initiate a timely transfer of members where indicators point to this achieving better outcomes for members. By updating our framework in this way, we also aim to help trustees identify, and avoid or overcome, barriers to effective member transfers,” Ms Cole said.

In order to ensure successor fund transfers achieve better outcomes for members, APRA has proposed updating the prudential framework to introduce new requirements:

  • for all trustees to be prepared for a future transfer of members, elevating what was previously guidance; and
  • relating to the transfer of MySuper assets within 90 days in the event that APRA cancels a trustee’s authority to offer a MySuper product.

APRA will also look to strengthen and simplify the transfer planning guidance contained in Prudential Practice Guide SPG 227 Successor Fund Transfers and Wind-ups.

Consultation on the transfer planning proposals is open until 10 March 2023. After considering submissions on the discussion paper, APRA intends to release draft transfer planning enhancements, following further consultation on the framework for SPS 515 Strategic Planning and Member Outcomes in the first half of 2023.

Today’s discussion paper is available on the APRA website at: Transfer planning in superannuation: proposed enhancements.

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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.