Up to 30% of defined-benefit super funds are concerned they won’t be able to stay in business because of increasingly poor investment markets cutting into their solvency.

To escalate the stress in the super market, the Australian Prudential Regulation Authority (APRA) has written to defined-benefit funds with an “incapability” to pay clients’ more than 1.2 times their entitled cover, and told them to seek actuarial advice and inform them of any plans to increase their profitability.

An APRA survey has found that about half of the country’s defined-benefit funds have experienced 10% or greater decline following a downturn in equity markets. About 90% of funds at the smaller end of the market experienced declines.

APRA GM Ramani Venkatramani says these results “are significantly better than in other countries”.

He said many small funds have decided to increase employer contribution rates or wind up the fund and convert it to a defined contribution (accumulation) fund.