APRA gives troubled super fund EISS merger deadline

The financial regulator has ramped up the pressure on EISS Super to merge with a bigger rival after an expenses scandal at the underperforming super fund, and also ordered it to halt sponsorship spending that was not in members’ interests.

EISS, a $5.6 billion industry fund for energy workers, has been under intense scrutiny after this masthead in September revealed accusations it had wasted members’ savings on questionable sponsorship deals, shortly after it failed a performance test from the Australian Prudential Regulation Authority (APRA).

APRA on Tuesday underlined its concerns about how EISS had been managed, issuing new licence conditions that included giving the fund until June next year to merge with a larger and better-performing rival.

The regulator, which has vowed to weed out underperforming super funds since the 2018 royal commission, said EISS would need to report to the regulator if it was unable to arrange a merger by the June deadline. Previous merger talks between EISS and TWUSUPER collapsed last month following the expenses scandal and a run of board resignations at EISS.

The regulator, which is conducting an inquiry into the fund’s spending, will also require EISS to implement better expenditure processes, review its spending and scrap any sponsorships that are not in members’ interests.

In a sign of the regulator’s concern, APRA member Margaret Cole said the best way for EISS to “optimise” outcomes for members of its MySuper product would be to transfer them to a better performing product as soon as possible.

“Being a trustee of an APRA-regulated super fund, and managing – and spending – billions of dollars of members’ money, is a privilege, not a right,” Ms Cole said in a statement.

“Although our investigation into EISS’s expenditure is ongoing, we have sufficient concerns about the trustee’s ability to demonstrate that some decisions are in members’ best financial interests that we believe it’s necessary to intervene now. Further action may follow, depending on what the rest of the investigation uncovers.”

One of the EISS sponsorships previously queried by former staff was a three-year marketing deal with the NRL, though the fund has defended the sponsorship as a commercially beneficial deal that was reviewed and assessed by an independent consultant.