This week’s Super Alert notes APRA’s planned use of ‘heatmaps’ for MySuper product comparisons, as well as noting the progress of some superannuation Bills through Parliament, the release of APRA’s 2018-19 annual report and an ASIC report on disclosure.
APRA’s plan for superannuation data collection and publication of MySuper product heatmaps
On 14 October 2019, APRA published a speech titled ‘Rising to the Challenge’, which was delivered by Deputy Chair Helen Rowell.
Some of Ms Rowell’s comments included:
- ‘APRA’s overarching objective for superannuation in recent years has been to drive a culture among all trustees of continuous improvement in the delivery of member outcomes, irrespective of the size of their funds’;
- ‘[APRA’s] plan also includes a major uplift in our superannuation data collection, and enhanced transparency on industry performance and supervisory actions’; and
- ‘The measure that has attracted the most attention across the industry and media is APRA’s plan to publish heatmaps providing our assessment of performance for all MySuper products… [T]he heatmap will display performance across a range of metrics in the areas of investments and fees and costs, and provide indicators of trends in sustainability measures. The heatmap is intended to be a starting point for member outcomes and performance assessment’.
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Bill to end grandfathered commissions passed by Senate
On 14 October 2019, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 (Bill) was passed by the Senate without amendment and now awaits Royal Assent.
As referred to in our Super Alert of 2 August 2019, the Bill will ‘end the grandfathering of conflicted remuneration by 1 January 2021’ and includes ‘a power to make regulations to establish a scheme, that will provide that those people paying conflicted remuneration rebate clients for any remuneration that would be paid after 1 January 2021’.
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ASIC releases report in relation to use of disclosure documents
On 14 October 2019, ASIC published its joint report with the Dutch Authority for the Financial Markets entitled ‘Disclosure: Why it shouldn’t be the default’ (Report). The purpose of the report is to consider how financial services disclosure operates in ‘the real-world context’.
According to ASIC, the Report reviews a number of case studies and explains why ‘disclosure and warnings can be less effective than expected, or even ineffective, in influencing consumer behaviour…[for example in] some instances it shows that disclosure and warnings can backfire, contributing to consumer harm’.
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ASIC relief proposed for financial adviser compliance scheme obligations
On 15 October 2019, ASIC issued a media release announcing that as a result of the Government’s plan to ‘accelerate the establishment of a single disciplinary body for financial advisers’, the role of current compliance schemes in monitoring and enforcing the Financial Planners and Advisers Code of Ethics 2019 will be displaced.
Accordingly, ASIC will prepare a legislative instrument to ‘grant a three-year exemption to all AFS licensees from the obligation in the Corporations Act 2001 to ensure that their financial advisers are covered by a compliance scheme, and from the associated notification obligations’. This will ‘provide certainty for AFS licensees that they will not be in breach of the law because their financial advisers were not able to register with an ASIC-approved compliance scheme by 1 January 2020, as originally required’.
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APRA publishes 2018-19 annual report
On 16 October 2019, APRA published its 2018-19 Annual Report. In relation to its supervision of superannuation in particular, APRA notes that it:
- ‘…has maintained its focus on addressing underperformance to improve member outcomes and lifting governance and risk management practices across the industry’; and
- ‘…continues to sharpen its supervisory focus in these areas, including developing an enhanced methodology and benchmarks for assessing superannuation performance and outcomes for members…[and] is expecting to publicly release the results of this analysis in late 2019, with the initial scope of work targeted at MySuper products’.
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Senate amends Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019
On 16 October 2019, the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 was passed by the Senate with amendments. The Bill has returned to the House of Representatives to consider the amendments made by the Senate.
As referred to in our Super Alert of 13 September 2019, one of the objectives of this Bill is to amend the Superannuation Guarantee (Administration) Act 1992 to ‘ensure that an individual’s salary sacrifice contributions cannot be used to reduce an employer’s minimum superannuation guarantee contributions’.
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House of Representatives passes the Treasury Laws Amendment (2019 Measures No. 2) Bill 2019
On 16 October 2019, the Treasury Laws Amendment (2019 Measures No. 2) Bill 2019 (Bill) was passed by the House of Representatives after being introduced last month.
As referred to in our Super Alert of 20 September 2019, the Bill proposes to amend:
- The Income Tax Assessment Act 1997 (Cth) to ‘extend the concessional tax treatment for genuine redundancy and early retirement scheme payments made to individuals who are 65 years or older provided the dismissal or retirement occurs before they reach pension age’;
- The Superannuation (Unclaimed Money and Lost Members) Act 1999 (Cth) to ‘enable the [ATO] to pay interest on amounts held by the commissioner that are proactively reunified with a person’s active superannuation account’; and
- The Superannuation (Unclaimed Money and Lost Members) Regulations 1999 (Cth) to ‘prescribe the rate of interest payable on inactive low balance accounts and amounts proactively reunified by the [ATO]’.
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ASIC releases report on review of TPD insurance
On 17 October 2019, ASIC released a report entitled ‘Holes in the safety net: A review of TPD insurance claims’ which summarises the findings and recommendations from its review of total and permanent disability (TPD) insurance in Australia.
In the report, ASIC noted that only 65% of notified TPD claims were accepted by insurers and expressed its concern that ‘the acceptance rate indicated problems both with the design of TPD policies … and with claims handling procedures’. A number of important industry-wide issues were identified, including ‘[p]oor consumer outcomes from the ‘activities of daily living’ test’. ASIC stated that it will ‘take further action, including enforcement action…’ and it will also ‘consider using… product intervention powers’.
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ATO compliance approach to pension tax bonuses
On 17 October 2019, the ATO announced that large APRA regulated superannuation funds ‘having difficulties complying with certain legislative requirements in providing a tax bonus to … members’ can rely on PCG 2019/7 which outlines the ATO’s transitional compliance approach. This is a finalisation of the draft Practical Compliance Guideline which was mentioned in our Super Alert of 4 October 2019.
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This alert was written by Natalie Cambrell, Partner, Sanela Osmanovic, Associate and Joseph Cheung, Solicitor.