Super Alert – 13 December 2018

Welcome to this week’s edition of HWL Ebsworth’s Super Alert. We trust that you will enjoy this edition.

ASIC report on relief applications – April 2018 to September 2018

On 6 December 2018, ASIC released Report 602 titled “Overview of decisions on relief applications (April 2018 to September 2018)”. In Report 602, ASIC sets out some of the relief application decisions it has made this year and summarised the approach it takes to exercising, or refusing to exercise, its modification powers under the Corporations Act 2001 (Cth).

In relation to superannuation, ASIC noted that it had “granted disclosure relief for a proposal to transfer a member’s superannuation benefits between two superannuation funds that had the same trustee…[because] although the transfer [involved] a technical change of fund for the member, after the transfer the member [held] a superannuation product that [contained] substantially the same rights and features in the transferee fund as they had in the transferor fund”.

However, ASIC confirmed that this situation did not exempt the trustee “from the requirement [to] send transaction confirmations to transferring members for the disposal of interests…and issue of interests” because this disclosure is “informative to members and the compliance costs for providing confirmation [does] not exceed ordinary business costs”.

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Regulations registered for one-year work test exemption for superannuation contributions

On 7 December 2018, the Treasury Laws Amendment (Work Test Exemption) Regulations 2018 (Regulations) were registered on the Federal Register of Legislation.

According to the Explanatory Statement, the Regulations will apply from 1 January 2019 and will:

• Provide “a one-year exemption from the work test for superannuation contributions to allow recent retirees to boost their superannuation balances”; and
• Allow “individuals aged 65 to 74 years with total superannuation balances below $300,000…to make voluntary contributions to their superannuation for 12 months from the end of the financial year in which they last met the work test”.

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Treasury consultation paper released for retirement income disclosure

On 10 December 2018, the Treasury released for public consultation a proposed “disclosure fact sheet for retirement income products” which is “a standardised, simplified document that outlines key metrics and features to help consumers compare different retirement income products”.

The Treasury is primarily seeking public views on:

• “the appropriateness of the proposed metrics in providing information for consumers to make select [sic] a retirement income product”;
• “the method of calculating risk to retirement income”; and
• “the presentation of the metrics for the fact sheet”.

Submissions to the consultation paper are due on 23 March 2019.

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ASIC research findings – consumer experience of the IDR process

On 10 December 2018, ASIC released Report 603 titled “The consumer journey through the Internal Dispute Resolution process of financial service providers”. In Report 603, ASIC published its research findings on “consumer experiences of the [IDR] process…and the obstacles many consumers encounter on their journey”.

In particular, ASIC found that:

• “approximately 3.2 million Australian adults considered making a complaint to a financial service provider in the preceding 12 months…and 1.5 million adults actually made a complaint”;
• Amongst the major reasons for complaints “almost half were about fees and charges (47%), a quarter about customer service issues (25%) and one-in-five about a decision made by the company (17%)”;
• “more than half of the consumers who contemplated making a complaint did not action their complaint… because almost half (47%) did not think it would make a difference”; and
• The common obstacles encountered include structural difficulties in relation to the lodgement of their complaint, lack of transparency in relation to a financial service provider’s IDR processes and poor customer service.

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ASIC further extends RG 97 compliance date

On 10 December 2018, the ASIC Corporations (Amendment) Instrument 2018/1088 (Instrument) was registered on the Federal Register of Legislation. This Instrument extends the date for compliance with ASIC Class Order [CO 14/1252] from 29 June 2019 to 29 June 2020.

According to ASIC, this extension is “due to upcoming consultation on the proposals arising out of recommendations made in the review of the fees and costs disclosure regime in Report 581 “Review of ASIC Regulatory Guide 97: Disclosing fees and costs””. ASIC is likely to shortly publish “a consultation paper in relation to the recommendations made [Report 581]”.

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APRA releases new prudential requirements for delivery of quality outcomes for members

On 12 December 2018, APRA released the following prudential standards and guides which will take effect from 1 January 2020:

• A new Prudential Standard SPS 515 Strategic Planning and Member Outcomes;
• Amendments to Prudential Standard SPS 220 Risk Management;
• A new Prudential Practice Guide SPG 515 Strategic and Business Planning; and
• A new Prudential Practice Guide SPG 516 Outcomes Assessment.

According to APRA, this package of standards is “the culmination of extensive industry engagement since August 2017” which aim to ensure “that RSE licensees rigorously assess their performance in terms of the outcomes they are providing their members and continually strive to improve those outcomes”.

Although the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Bill 2017 currently before Parliament “would, if passed, introduce a legislated outcomes assessment”, APRA has introduced these standards now “to maintain industry momentum towards delivering improved outcomes for members”. These standards will be reviewed to determine “whether amendments are needed to the prudential framework…if the Bill is passed by Parliament in future”.

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This article was written by Natalie Cambrell, Partner, Damian Tarulli, Special Counsel and Sanela Osmanovic, Associate.