Australian Superannuation assets equated to $2.8 trillion at the end of the September 2018 quarter – a figure that continues to grow as more Australians co-contribute to their superannuation funds as well as portfolio growth.
In fact, Rice Warner estimated that there will be $4.79trn in funds under management in 2033.
The Hayne Royal Commission shone a spotlight on the superannuation industry – with consumers voting with their feet, and the Australian Prudential Regulation Authority (APRA) working on frameworks to better protect consumers and deliver member outcomes.
APRA’s finalised package of measures was due to take effect on 1 January 2020 to address areas for improvement in the regulatory framework and improve member outcomes. While some initiatives, including APRA’s inaugural Superannuation Heatmap, were successfully launched – many changes have been delayed due to COVID and the reprioritisation away from regulatory reform towards member support.
After a rocky 12 months, the reform agenda is back on the table with notable changes impacting both superannuation funds and employers – like the increases in the Superannuation Guarantee – and from the end of this year superannuation funds will automatically follow employees throughout their careers.
This last one will be achieved through the extension of how Tax File Numbers are used, and while seemingly a small change, is revolutionary in terms of how superannuation funds source new members. So in theory, if a young person gets a retail job during university, the superannuation fund they join then will follow them for the next few decades unless they make the conscious decision to change funds. It’s potentially a different kind of “set and forget”.
We are also seeing activity off the back of the Heatmap that was introduced in December 2019 with APRA following through on their commitment to “name and shame” and sanction providers that they deem to be underperforming. An interesting twist that may yet cause issues – while a superannuation fund is under sanction they cannot accept contributions for members. The question from employers will be, where do those contributions go in the meantime?
The ultimate aim of regulatory reform in the superannuation sector is to increase transparency and improve member outcomes. This may require a change in thinking, business strategy and systems to ensure they can meet new obligations.
