Super Alert – 7 June 2019
This week’s Super Alert covers a Treasury consultation in relation to the financial institution supervisory levy, changes to ASIC’s financial calculator relief and further updates from APRA in relation to the PYS legislation.
Changes to ASIC relief for superannuation and retirement calculators
On 4 June 2019, the ASIC Corporations (Amendment) Instrument 2019/514 (Instrument) was registered on the Federal Register of Legislation which amends ASIC Corporations (Generic Calculators) Instrument 2016/207 (Calculator Relief). Section 6(1)(d)(iv) of ASIC’s Calculator Relief requires a financial calculator to include “a clear and prominent statement setting out the present value of [an] estimate…where the estimate is of an amount payable at a future time of 2 or more years”. The present value is based on an assumed inflation rate of 2.5%.
The Instrument amends the Calculator Relief by requiring the default assumed rate to be 3.2%, or an alternative rate if certain statements are made to the user of the calculator. According to ASIC’s associated media release issued on 5 June, “[t]he default inflation rate set out in the instrument is the rate used by ASIC’s MoneySmart superannuation and retirement calculators…[t]he option of using an alternative inflation rate recognises that there may be instances where it is appropriate for a superannuation and retirement calculator to use a different inflation assumption…[these amendments] will promote the comparability of superannuation and retirement estimates whilst providing flexibility for providers to use a different inflation rate assumption where it is reasonable to do so”.
The Instrument will commence operation on 5 December 2019.
Discussion paper released for financial institution supervisory levy
On 4 June 2019, Treasury released a discussion paper in relation to the “proposed financial institutions supervisory levies that will apply for the 2019-20 financial year” (Discussion Paper). According to the Discussion Paper (which was prepared in conjunction with APRA):
- The purpose of the levies is “to recover the majority of the operational costs of [APRA]…[and other] Commonwealth agencies and departments”;
- The total funding required is a 10% increase from the 2018/19 financial year and this “is largely attributable to additional funding for the [Royal Commission]”; and
- The estimated levies have been split by industry and 37.8% of the funding is proposed to be recovered from the superannuation industry for the 2019/20 financial year for the “implementation of new legislation and prudential standards designed to improve superannuation member outcomes, a continued focus on underperforming superannuation funds, and improving the scope and quality of industry data”.
Submissions on the Discussion Paper close on 14 June 2019.
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APRA updates PYS frequently asked questions
On 3 June 2019, APRA released an updated version of its ‘Protecting Your Super’ frequently asked questions (FAQs) which were reported in our Super Alert of 10 May 2019.
According to the updated FAQs:
- “in respect to [sic] members leaving a fund part way through the year, APRA expects that a trustee acting in the best interests of members would endeavour to provide the refund for fees in excess of the fee cap to any exited members no later than 3 months after those members have left the fund”; and
- “[i]nsurance products where members are on claim are subject to the PYSP insurance opt-in changes as these types of offerings are not excluded under section 68AAA. Where members are on claim, APRA considers that the rights of these members in relation to the insurance benefit currently being paid would ordinarily not be affected by the insurance opt-in changes. That is, the operation of section 68AAA relates to the taking out or maintenance of insurance, not to the rights of a member in respect of the insurance cover.”.
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This alert was written by Natalie Cambrell, Partner, Damian Tarulli, Special Counsel and Sanela Osmanovic, Associate.
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Important Disclaimer: The material contained in this publication is of a general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.