24 July 2015
Key to super governance is getting the details right: ASFA
The Association of Superannuation Funds of Australia (ASFA) released today its submission supporting the government’s proposed changes to superannuation governance but is also suggesting that some components be awarded further consideration.
ASFA supports the inclusion of at least one-third independent directors for all APRA-regulated superannuation funds, with one of these directors serving as an independent chair.
ASFA CEO Pauline Vamos explains, however, that this support should not be seen as an indication that current governance structures are not effective, but instead recognises changing community expectations, increased complexity and risk in running superannuation businesses and significantly higher regulatory standards and liability.
“ASFA supports increasing the number of independent directors on the boards of super funds and we recognise that over the past few years, many trustee boards across all sectors have already taken the opportunity to supplement their skills and have appointed independent directors,” said Ms Vamos.
“The right independent directors can offer diversity of thought and the benefit of experience outside traditional superannuation services.”
While ASFA supports the governance initiative, the association has called for further consideration of the complexity of the superannuation sector.
“In order to be realistic in our transition timeframes and criteria, we need to consider the many different structures and sizes across the superannuation sector,” said Ms Vamos.
“A ‘one size fits all’ approach may have unintended consequences, and as such ASFA urges both the final legislation and APRA prudential standards to be principles based and rolled out across a minimum three year transition period.”
ASFA does not support the proposed requirement for RSE licensees to disclose whether they have a majority of independent directors in their annual report, given that the majority benchmark is inconsistent with the proposed board composition requirement and could lead to community confusion.
The ASFA submission also highlights the definition of ‘independent’ and ‘material relationship’ as areas where further work is required as the current wording creates the risk that current directors who are effectively independent will no longer be so.
“In a compulsory and concessionally taxed system, it is crucial that those who look after the retirement incomes of Australians continue to achieve and maintain high levels of effective governance. However, we must ensure that there is the flexibility to get the right people with the right experience, knowledge and skills on these boards.
“We look forward to working with the government and APRA to get the details of these important reforms right,” concluded Ms Vamos.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.