Executive remuneration structures are much simpler in the superannuation industry than those which apply to the banks and insurance companies, according to the Australian Prudential Regulation Authority (APRA).
The regulator this week issued an information paper on executive remuneration highly critical of the approach of many of the big financial institutions but pointed to “some noticeable differences for RSE Licensees [superannuation funds]”.
“As a general observation, the remuneration structures within RSE Licensees in the sample were simpler in structure,” the APRA paper said. Short Term Incentives (STIs) were in the form of cash rather than shares, with a maximum deferral period of two years.”
Further, APRA said no RSE Licensee in its survey sample incorporated a Long Term Incentive (LTI) component into its remuneration structure.
“Where STI arrangements were in place for RSE Licensees, the ratio of performance-based remuneration to fixed remuneration (for senior executives other than the Chief Investment Officer (CIO)) was significantly lower - at 10 per cent to 30 per cent - than seen at institutions from the other industries in the sample,” it said.
However the regulator said that staff working within investment teams, including chief investment officers, tended to have remuneration structures that included larger proportions of performance-based remuneration.
“Finally the application of malus at superannuation entities was observed to be less prevalent than in the other industries. Similarly, buy-outs, sign-on payments and guaranteed bonuses in the superannuation industry were also less frequently observed.”
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.