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Many funds in net cashflow decline
Superannuation funds may find it difficult to measure up to Australian Prudential Regulation Authority (APRA) expectations with 119 of 175 funds experiencing declining net cashflow ratios over the past three years, according to actuarial research house, Rice Warner.
In an analysis published this week, Rice Warner pointed to the approach being taken by APRA and noted that while many superannuation funds might appear to be performing quite well by some measures, this would not necessarily be the case when measured by APRA’s member outcomes analysis.
“Rice Warner has undertaken analysis of the APRA cashflow statistics. It reveals a fascinating picture – 119 of the 175 funds with data experienced a declining net cashflow ratio over the past three years,” it said.
The Rice Warner analysis pointed to the fact that some funds which were cashflow positive might still rank as “poorly performing” funds under the APRA member outcomes test which measured the most recent 12-month cashflow against a three-year average.
The analysis said that in this environment trustees would need to be able to articulate where their fund sat in relation to identified member outcomes and why.
“Those funds that consistently perform poorly against several of the member outcomes tests will need to be able to justify why APRA should not consider them to be poorly performing,” the Rice Warner analysis said. “For many funds, there will be justification for their position. For others, they will need to demonstrate that they are acting on the evidence to improve the proposition.”
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