APRA’s excessive fee warning on super contingency | Australian Markets

Superannuation funds must be diligently exploring and exhausting all avenues for raising financial assets earlier than hitting members with charges to construct a contingency reserve, based on the Australian Prudential Regulation Authority (APRA).

Whereas acknowledging the flexibility of tremendous fund trustees to construct contingency reserves, the regulator has instructed Senate Estimates that the charges charged by funds shouldn’t be extreme.

APRA had been requested by NSW Liberal Senator, Andrew Bragg what would occur if a main fund was hit with a regulatory effective and its contingency reserve was not enough to pay the effective.

APRA’s formal reply to the query made clear that in such an occasion superannuation funds would need to search out the money elsewhere, or file for insolvency.

“If a trustee incurred a fine/penalty that exceeded the amount in its reserve, the trustee would need to obtain an alternative source of capital to pay the fine/penalty. If a trustee was unable to find an alternative source of capital, the trustee would need to file for insolvency and a replacement trustee or acting trustee would need to be appointed,” the regulator’s reply stated.

APRA identified that from 1 July this yr Prudential Normal 515 (SPS 515) will require superannuation fund trustees to have controls to make sure they’re in a sound financial place together with a capital management plan to control the permitted use of financial assets held on the trustee company degree.

“SPG 515 outlines APRA’s expectations where fees are charged to contribute to a trustee reserve, including that the amount generated would not be excessive, and that the level would be transparent and evidence-based,” it stated.

“SPG 515 further outlines APRA’s expectation that trustees should diligently explore and exhaust all other avenues for raising financial resources before building a financial contingency reserve by charging fees.”