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Remaining on the front foot
The superannuation industry did not have a quiet 2020 or 2021 and should not expect a quiet 2022 either.
The Australian Prudential Regulation Authority (APRA) is putting pressure on super funds to merge and many mergers are on the horizon for the new year.
Not only this, despite APRA executive director, Margaret Cole, claiming the regulator could not “compel a merger” but could have conversations leaning with “moral suasion and put directions on discussions around mergers” it has done just that with EISS Super.
The regulator placed new license conditions on EISS Super and one of the conditions was to “implement a strategy to merge with a larger, better-performing fund by 30 June, 2022”. Given this, the industry could expect this heavy-handed approach to continue.
The retirement income covenant will take effect from 1 July, 2022, allowing product providers to launch new retirement income solutions.
However, industry participants are reluctant to launch new products given the lack of guidance from the regulator which has said it is not looking to issue extensive or detailed guidance in the short-term. It will be interesting to see what solutions will be released in 2022 and how they may evolve.
Super funds will also need to consider its strategy around its reserve as there are proposals for ‘Section 56 amendment’ to pass Parliament that would prevent super funds from using members’ money to pay penalties imposed by regulators from early 2022.
This year has also seen the introduction of the Your Future, Your Super regime including the stapling of super funds, the first round of performance test results, and the introduction of best financial interests duty.
With stapling, the impact on insurance in super remains to be seen as the median age and account balance of members will likely rise but could see members in funds have a wider range of occupations.
This has the potential to lead to more basic levels of default cover and more general underwriting tools.
The performance test next year will not only include MySuper products but be extended to other superannuation products and specified investment options. Depending on the results of next year’s performance test it could put more funds under the microscope from APRA and its merger mission.
The industry must be on the front foot to handle those challenges next year while also navigating the Federal Election.
This is the last print edition of Super Review for 2021 and will return in 2022. The bi-weekly newsletter will continue through until Thursday 16 December.
The entire Super Review team wishes our readers a very happy holiday season and a safe and prosperous 2022.
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TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
32.57 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
27.42 3 y p.a(%)
