Anyone who has ventured into the kitchen with an implement more potent than a dishcloth knows the feeling: halfway through the recipe you realise that there was something you were supposed to do before you got to that point, except the recipe only brings it up now.  ‘Add the carefully whisked egg whites’ (egg whites? the recipe hasn’t mentioned egg whites before).  ‘Pour mixture over the biscuit base you prepared earlier’ (what biscuit base?). That kind of thing.

The problem of course is that sometimes it is not possible to sequence steps in a perfectly linear manner; parallel processes are sometimes unavoidable.  Just ask the Treasury officials responsible for overseeing the programme of legislative activity appearing under the banner ‘Stronger Super.’  So far that programme comprises five Commonwealth Acts, one Regulation, twelve Prudential Standards and thirty seven Reporting Standards.  Those legislative instruments are supported by nine Prudential Practice Guides from APRA and several Regulatory Guides from ASIC.  A further three Bills wait in the wings, having been presented to at least one House of Parliament in recent months.  That is quite a lot for the industry and its professional advisers to digest.

The Stronger Super reforms are complicated.  In many cases they are interdependent. The new MySuper product relies on SuperStream, the new reporting requirements and the enhanced directors’ duties.  But the MySuper initiative cannot be delayed until those other areas are bedded down because the MySuper products of each Registrable Superannuation Entity (‘RSE’, aka the trustee) will be the single largest responsibility of the RSE for all but a few retail funds.  So to some extent they have to happen simultaneously.

Against this, the industry and profession clamoured during the consultation phase of the Stronger Super reforms to have the legislation released progressively, so that it could be assessed more effectively.  There was also a consensus that the starting dates should be staggered, so that there would be time to get some of the more complicated IT issues sorted out properly. 

Finally, to complicate matters further, the Stronger Super reforms coincide both in time and, in many cases, in application with the Future of Financial Advice reforms.  It is a bit like having to accommodate a dessert soufflé in the oven with the braised lamb shank.  Open the oven to remove the lamb shank when its time is done and you risk seeing the soufflé shrivel into a sticky, disappointing mess (apparently).  Sequencing is everything.

The challenge, then, facing Treasury and APRA has been to sequence the legislative programme so that the souffle doesn’t flop, and to do so in a Parliament teetering seemingly constantly on the brink of breakdown.  Have they succeeded?  There have certainly been slip-ups (there are currently two s29VA(9) in the Superannuation Industry (Supervision) Act 1993 for instance) and there are areas where further changes are going to be required very quickly (the inadvertent confusion of ‘fees’ and ‘costs’ in the MySuper charging regime[i] instantly springs to mind).  But on the whole, the industry and profession seem to have been surprised.  APRA has responded to feedback and suggestions on what, for a regulator besieged by institutions responsible for nearly one trillion dollars, can only be described as a reasonably open basis.  There has been a swathe of consultations, briefings and feedback sessions right across the country.  Treasury has been less publicly available, but has clearly also assimilated feedback from industry associations such as ASFA, the FSC and AIST, as well as the Law Council of Australia.  No one (other than a few consultants) enjoys having to make the widespread changes required by the new rules, nor the uncertainty created where the rules are new or ambiguous, but there does seem to be widespread appreciation that the recipe is complicated and those in the kitchen (primarily Treasury and APRA) have been under intense time pressure and unprecedented scrutiny.  Everyone knows the result certainly won’t be a perfect product. Only time will tell whether they have made a meal of it.