Regulator questions how super funds spend your money

Australia’s financial watchdog has expressed its doubts about how superannuation funds are spending your money and whether their decision-making puts your financial best interests first.

The Australian Prudential Regulation Authority (APRA) has written to the funds after scrutinising their expenditure, setting out its expectations and what it sees as better practice. 

A statement said, “… APRA has sought information from [the funds] … where APRA observed comparatively higher levels of expenditure or where the member benefit of specific expenditure was not immediately apparent. As part of this process, APRA has reviewed thousands of documents relating to discretionary expenditure, marketing and connected entity spending.” 

APRA has particularly focused on 14 super funds but has not named them or listed their failings. However, it told the funds it would be intensifying its scrutiny of how they spent members’ money, so it could achieve better outcomes for members. 

Areas for improvement include lack of rigour when entering into agreements, making decisions to proceed with contracted expenditure without demonstrating a clear rationale, and looking at the activities of peers rather than delivering outcomes to members. 

“Members’ balances at retirement age are inherently shaped by the stewardship, governance, and decision-making of their Registrable Superannuation Entity (RSE) licensee,” APRA said. 

“The expenditure decisions made by RSE licensees regarding how funds are spent may have a lasting impact on members’ retirement outcomes. It is, therefore, crucial that all expenditure decisions are made with a clear and demonstrable focus on members.” 

In a letter to funds, the regulator said its high-level expectations of funds included: 

• A robust decision-making approach with clear links to strategic objectives and expected financial outcomes for members (e.g., estimated dollar value benefit or saving) 

• A comprehensive expenditure management framework with clear definitions and expectations, thresholds, and approval requirements inclusive of a risk assessment 

• Periodic monitoring that utilises member-outcomes focused success metrics to measure improved or declined financial outcomes to members, and acting on insights further to these metrics 

• Reporting that is supported by evidence and data with clear links to member impact.

ABC News reports that despite normal services resuming at HESTA super, dozens of HESTA members have contacted it, “distressed and frustrated they are still unable to access their own super funds”.

HESTA, one of Australia's largest super funds with more than 1 million members, went offline at the end of April for a seven-week planned outage, as the fund changed administration providers. 

Despite the outage ending at the start of June, members have reported that their applications to withdraw funds have still not been processed, while wait times on the phone can be up to three hours. 

One woman said she had to cancel surgery because she couldn't draw down on her superannuation fund. Another man said he is concerned his wife will lose her place at a nursing home because he cannot access super to pay the deposit. 

In a response to the ABC, a spokesperson for HESTA said, “While we resumed online services as scheduled and many members are transacting as normal, we recognise some members have experienced long call wait times and processing delays. 

“We apologise to members who haven't had the experience they should expect from HESTA and are working hard to resolve these issues quickly.”