The Australian Prudential Regulation Authority (APRA) plans to strengthen a core prudential standard to enhance member outcomes in superannuation.
APRA is updating Prudential Standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) to drive better outcomes for superannuation members in areas such as trustee expenditure of member funds, management of financial resources and the transfer of members in and out of funds.
The reforms follow changes to the superannuation operating environment since SPS 515 came into effect in 2020, including continued industry consolidation and legislative change.
APRA’s proposed reforms to SPS 515 aim to:
- ensure expenditure requirements better align with the best financial interest duty and, for the retirement phase, to support the retirement income covenant. Under the reforms, trustees must be able to justify the purpose of expenditure relating to business operations;
- lift the bar on trustees’ management of financial resources. The draft SPS 515 seeks to ensure trustees maintain a prudent approach in areas such as fee setting and managing member-funded reserves; and
- improve management of risks to members being transferred across funds.
Additionally, following a review of SPS 515 and associated guidance, APRA has decided to retire its guidance circular on the sole purpose test. APRA has no plans to issue new guidance.
Deputy Chair Margaret Cole said updating SPS 515 was one of APRA’s most important policy priorities in superannuation.
“SPS 515 goes to the heart of what trustees need to do. Updating the standard will ensure trustees have robust business operations and are held to account to deliver outcomes that are in the best financial interests of their members.”
Ms Cole said the sole purpose test circular, published in 2001, had been created for a different generation of superannuation trustees.
“The circular was designed more than 20 years ago for a larger number of less sophisticated trustees. It offered general guidance and had no legal status or effect. Trustees are operating more mature businesses today and are well placed to make decisions consistent with their legislative duties.”
A copy of the discussion paper Strategic and transfer planning: enhancing member outcomes is available on the APRA website at: Strategic planning and member outcomes: proposed enhancements.