THE regulator’s new heatmaps are a welcome new tool to help identify underperforming funds but further work needs to be done to get the methodology right, Industry Super Australia said.

Underperformance can cost some members up to $500,000 in their retirement nest eggs, so must be tackled wherever it is found in the superannuation sector.

The Australian Prudential Regulation Authority’s (APRA) heatmaps are an important first step in highlighting underperformance and making trustees more accountable.

But ISA has some concerns in the methodology APRA used to generate the heat maps, these include:

- The failure to give primacy to net returns (after all fees and costs) for performance benchmark comparisons as the Productivity Commission did

- Excluding the effect of admin fees in much of the benchmarking, despite acknowledging high admin fees are associated with poor performance

- The use of simplistic and arbitrary metrics to adjust for risk which may materially affect the benchmarks a product is compared to

- Not assessing long term returns (10 years or more) where data is available.

Importantly the heatmaps should be expanded to cover the Choice sector, as underperformance is not limited to MySuper products, in fact, most underperforming products are in the Choice sector.

With too many Australians still stuck in underperforming super funds, the focus of the Government, regulator and the superannuation sector must be on ensuring members are connected to a single, quality-checked and high performing fund with low fees and good returns.

Tools such as APRA’s new heatmaps will provide an important bottom-up approach to tackling underperformance, rather than a top-down approach.

Industry Super Australia deputy chief executive Matthew Linden said, "As a priority, the costly drain of underperformance needs to be dealt with – wherever it occurs in the system. APRA’s heatmaps are a vital tool to shine a light on this underperformance and get trustees to lift their game, but more work is needed to get the detail right.

“We expect to see the worst performers called out, but are concerned methodological flaws may cast some products in a poorer light than warranted, while other products appear okay when they’re not.

“With any new measuring tool there are always kinks to iron out and we look forward to working with APRA as they refine the first cut of analysis and update the results in the new year.”

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THE Joint Committee of Public Accounts and Audit has commenced a review of the operations of the Parliamentary Budget Office (PBO) pursuant to section 64T of the Parliamentary Service Act 1999.

The Committee will inquire into and report on:

• PBO implementation of the recommendations of the PBO Review 2016/17 Report of the Independent Review Panel;
• PBO implementation of the recommendations from the 2014 Joint Committee on Public Accounts and Audit Report No. 446 Review of the Operations of the Parliamentary Budget Office;
• Stakeholder relationships and engagement; and
• Possible areas of reform to support the effective operation of the PBO.

Lucy Wicks MP, chair of the committee, said, "This review will provide an opportunity for the Committee to gain an understanding of how the Parliamentary Budget Office (PBO) has improved since its previous independent review. The Committee will also examine options for possible areas of reform to support the effective operation of the PBO."

Submissions from interested individuals and organisations are invited by Thursday, January 23, 2019. The preferred method of receiving submissions is by electronic format lodged online using a My Parliament account.

Further information about the review is available on the Committee’s website.

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THE PERSONAL insolvency regulator, the Australian Financial Security Authority (AFSA), has identified and proven over $4m of fraud, according to a new report released today.

The Personal Insolvency Compliance Report, available now on the AFSA website, outlines AFSA’s compliance, regulatory and enforcement activities across the 2018-19 financial year. 

Hamish McCormick, chief executive of AFSA and inspector-general in bankruptcy, said the annual Personal Insolvency Compliance Report provides insight into the regulation of Australia’s personal insolvency system.

“AFSA is working to be both a firm and a fair regulator," Mr McCormick said.

“We undertake regulatory and compliance work to ensure that the personal insolvency system is equitable, and that all participants are meeting their obligations.

“Overall, we aim to provide the community with a personal insolvency system that they can have confidence in.”

Mr McCormick highlighted some of the report’s key findings – including complaints against registered trustees and criminal prosecutions.

“In 2018-19, we received nearly 2,000 referrals of alleged misconduct,” Mr McCormick said.

“We analysed each referral and found that 744 warranted further investigation. We referred 115 of these matters to the Commonwealth Director of Public Prosecutions.

“In total, 96 individuals were prosecuted for offences under the Bankruptcy Act. Our prosecutions attracted wide-ranging penalties, from fines to imprisonment.

“Pleasingly the number of prosecutions decreased in 2018-19, down from 137 in the previous year. The overall value of proven fraud also dropped, down from $5.5 million in 2017-18 to $4.6 million.”

Complaints about registered trustees, and the Commonwealth Government's Official Trustee, both increased in 2018-19.

“In 2018-19 we received 296 complaints about practitioners, up from 257 the year prior. Similarly, complaints about the Official Trustee also rose – we received 48 compared to 10 in 2017-18," Mr McCormick said.

“However, only nine complaints about registered trustees were found to be justified. And only one complaint about the Official Trustee was justified.”

The report noted that the conduct of untrustworthy bankruptcy advisers remains a potential threat to community confidence in the personal insolvency system. In 2018-19, AFSA made a concerted effort to disrupt the activities of untrustworthy advisers, who provide dodgy advice to people at a time when they are in financial difficulty and vulnerable.

“In 2018-19, we worked closely with registered trustees and industry bodies to identify and disrupt untrustworthy advisers,” Mr McCormick said.

“During the year we finalised three prosecutions involving untrustworthy advisers, and one more is still in progress. We will continue to target untrustworthy advisers in an effort to protect the integrity of the personal insolvency system. And where appropriate, we will refer matters to the Commonwealth Director of Public Prosecutions for action.”

The full report is available now on the AFSA website.

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THE Queensland Resources Council (QRC) has welcomed the partnership between Brisbane-based Armour Energy and Santos through the South Nicholson Basin Farmin Agreement.

QRC chief executive Ian Macfarlane said diversity in the state’s gas industry leads to smaller and larger operators using each other’s strengths to develop gas.

“This agreement is good news for the gas industry and demonstrates the collaborative approach in the development of gas fields in Queensland,” Mr Macfarlane said.

Under the agreement, Santos with a proven track record in safe and environmentally sustainable operations, will assume operatorship and has right to earn a 70 percent interest in Armour's South Nicholson Basin tenements in North Queensland and the Northern Territory. In return Armour will receive an upfront $15 million capital injection from Santos and a free carry on the proposed work program up to a total capped amount of $64.9 million."

Mr Macfarlane said Queensland remains a leader in responsibly developing gas which was good for all customers both domestic and international.

“Queensland’s gas industry invested $8 billion into the State’s economy last financial year, supported 37,984 full time employees and spent $2.7 billion with local businesses and community organisations,” he said.

www.qrc.org.au

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