The Government today announced a proposed compensation scheme that would provide superannuation members with a clearer pathway to compensation where significant losses arise because trustees have failed to meet their obligations.
Under the Government's proposal, APRA would set capital requirements for trustees offering higher risk investment options. These requirements would seek to ensure trustees have the financial capacity to meet their obligations under the proposed compensation scheme.
APRA intends to consult on the detailed design of the framework once the Government has finalised the relevant legislation.
The Government's proposed compensation scheme will complement APRA's broader work to strengthen investment governance in superannuation. Together, these reforms will strengthen member protection by reducing the likelihood of trustee failures and improving outcomes when failures occur.
As part of this work, next month APRA will consult on a package of reforms to lift investment governance standards and reduce the likelihood of member harm. These reforms are part of APRA's multi-year efforts to lift investment governance standards across the superannuation industry, particularly within the platform trustee segment.
The proposals directly address many of the shortcomings that were identified by APRA in its 2025 review of industry practices covering around 95 per cent of platform assets under management.
The proposals would strengthen requirements across eight areas covering the full investment management lifecycle. The main proposals include:
- Ensuring that a trustee's investment management capability is commensurate to the complexity of their investment menu;
- Addressing weaknesses in onboarding, monitoring and offboarding practices;
- Addressing material conflicts;
- Improving member-level diversification; and
- Strengthening trustee oversight and accountability.
The investment governance reforms would apply to all trustees. However, the impact will be most significant for platform trustees, given their investment menus are typically broader, platform products are more complex, and financial advisors can play a larger role in selecting and recommending investment options. The proposals will have a limited impact on trustees with strong investment governance and simpler business models.
These proposals follow substantial supervisory and enforcement activity already undertaken by APRA. Following the 2025 review, APRA directed trustees to urgently uplift investment governance practice. It has also taken enforcement action against five trustees for investment governance failings.
APRA Chair John Lonsdale said:
"The Government's proposed compensation scheme will reinforce APRA's proposals by creating a stronger incentive for trustees to remediate poor investment governance.
"APRA's investment governance reforms aim to raise standards across the sector and reduce the likelihood of member harm from poor investment options.
"Together, these key reforms strengthen member protection significantly."
