Developments in the superannuation industry, including the growth of SMSFs, highlight the need to reassess the current regulatory framework, according to the Association of Superannuation Funds Australia (ASFA).
In its submission to the Financial Systems Inquiry, ASFA said the regulatory approach to superannuation needs to be adjusted to ensure consumer protection gaps are identified and addressed.
“A review of the regulatory framework is made even more crucial because the compensation is different between [a] superannuation investor within an APRA-regulated fund who suffers a loss as a result of the failure of that fund [and] an SMSF trustee who selects a related product for their SMSF portfolio,” ASFA stated.
“Whilst there have been continuing changes to the regulation of the superannuation system and industry, the overall regulatory framework is still fundamentally based upon the traditional structure of a superannuation provider. That is, a standalone trust with only a few investment options and a trustee board. This assumption is no longer valid,” the submission said.
ASFA also stated its concern about the lack of a “system-wide view” of superannuation available to a regulator or public policy maker.
“There is no aggregate data on superannuation investments across the whole super pool [and] no clear visibility of the significant role of other parties such as administrators, custodians, clearing houses and gateways,” ASFA stated.
“[There is] no high-level view by a single regulator to monitor the whole of the system given we have two significant pools of money (SMSFs and pooled funds) and an emerging third pool of retirement assets.”
ASFA also expressed concern regarding the lack of information about the asset holdings of SMSFs compared with other super funds.
"While data collection across APRA-regulated funds has increased considerably, the ATO is not at this time able to provide the same level of information on SMSFs,” ASFA said.
"Without this data, it is difficult to assess the extent of any of the risks emerging in the system.”
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