ASFA Action 20 November 2024

ASFA Action Issue 973

In this issue:

Unfair trading practices: consultation

Treasury is consulting on proposed amendments to the Australian Consumer Law (ACL) to include a general principles-based prohibition as well as specific prohibitions on certain types of unfair trading practices.

At this stage, the proposals are not directed at financial services.

In 2023, as part of an earlier consultation, it was indicated that consideration of extending unfair trading reforms to financial services would be “advanced in 2024”. However, in its current consultation paper, Treasury notes “There are important differences between the ACL and financial services law in Australia which mean that mirroring any changes to the ACL requires careful consideration. Once options to amend the ACL have been considered and agreed in consultation with States and Territories, the government will consider what changes are required to financial services regulated by the ASIC Act to ensure appropriate alignment across the ACL and financial services laws.”

Treasury is seeking feedback on its consultation paper by close of business Friday 13 December.

Enhanced public beneficial ownership disclosure for listed companies: consultation

Treasury is consulting on amendments to the Corporations Act 2001 to increase the disclosure of ownership information for listed companies and broaden ASIC’s regulatory enforcement powers, as part of work to implement the Government’s election commitment to implement a public beneficial ownership register.

Treasury undertook an initial consultation on the Government’s proposals in November-December 2022. This newest phase of consultation is focussed on disclosures by listed companies.

Treasury is seeking comments by close of business Friday 13 December.

Superannuation reforms for the retirement phase: Government announcement

The Government has announced a set of proposed reforms to the retirement phase of superannuation.

The reforms comprise:

enhanced, independent consumer guidance, for example via expanded and refreshed resources on ASIC’s Moneysmart website and a consumer education campaign, from the first half of 2025

changes to income stream regulations, from 1 July 2026, to better support innovation in retirement products – potentially through features like a money back guarantees and instalment payments instead of an upfront lump sum

establishing new, voluntary best practice principles for the industry around retirement product design

a new retirement outcomes reporting framework to improve transparency for consumers. This will commence in 2027, with data collected and published by APRA annually. APRA and ASIC will also deliver a pulse check report by the end of 2025 to assess trustees’ progress under the retirement income covenant.

The reforms are intended to complement the Government’s Delivering Better Financial Outcomes package (its response to the Quality of Advice Review) and aim to strengthen outcomes for retirees.

The Government will consult on the reforms in detail in 2025.

Portability of retirement savings with Cook Islands

The Government has announced it has signed a Memorandum of Understanding (MOU) with the Cook Islands to allow portability of retirement savings between our two countries.

The Government notes that the new portability arrangement:

“…addresses a gap in the existing TransTasman Retirement Savings Portability scheme that prevented Cook Islands citizens from sending Australianearned superannuation to their home country, while also being unable to release accumulated superannuation under the departing Australia superannuation payment (DASP).

The scheme will allow those who move to the Cook Islands permanently to transfer their superannuation to the Cook Islands National Superannuation Fund.

Workers with accumulated retirement savings in the Cook Islands will be able to move their savings to Australia upon permanent migration.”

The existing TransTasman Retirement Savings Portability scheme applies only in relation to the movement of retirement savings between Australian superannuation funds and New Zealand KiwiSaver accounts.

The intention to create this portability arrangement was announced in last December’s Mid-Year Economic & Fiscal Outlook statement (see ASFA Action issue 927), with an intended commencement date of 1 July 2025.

The Government has now indicated the scheme will commence following implementation of the necessary law changes and agreement by each country – it is unclear if this means a change to the original 1 July 2025 commencement date. (For reference, implementation of the existing scheme with New Zealand required the passage of enabling legislation in both countries as well as amendments to the Superannuation (Industry) Supervision Regulations 1994.)

Death benefit claims handling: ASIC letter to superannuation CEOs

ASIC has written to superannuation fund CEOs, urging them to assess their funds’ death benefit claims handling practices and address any identified deficiencies.

The letter flags ASIC’S observations of operational failures by trustees to gather and analyse data that provides insights into the outcomes experienced by claimants.

Improving services to superannuation fund members is a strategic priority for ASIC. In 2023, ASIC commenced a multi-year project looking at industry practices and compliance with laws relating to trustee administration and contact centres. Initial observations were published in May (see ASFA Action issue 944), with requests made to 10 trustees for granular claims data and documents such as policies, procedures, communications, claims files and complaints records.

ASIC will issue a public report in early 2025, with detailed insights from the completed review. In the meantime, ASIC is highlighting its “observations of consistently weak trustee practices to prompt immediate action, where appropriate”.

ASIC’s letter to trustee makes observations around these key areas:

collection of claims handling data that is accurate and fit for purpose

regular and complete reporting to boards of meaningful performance metrics

meeting the trustee’s obligations to members and beneficiaries

ASIC is asking fund CEOs to:

share the letter with the members of your board

review the fund’s internal dispute resolution data (if this has not already been done) to identify trends and themes that might help identify potential frictions or areas for improvement in death benefit claims handling processes, including in data collection

conduct a preliminary business assessment against the observations in the letter, including any outsourced services, and discuss with the board areas for improvement in the trustee’s oversight of its death benefit claims handling function and steps that the trustee can take to improve

carefully review the report when it is released and identify further areas for improvement

include longer term commitments in the trustee’s 2025 business plans to improve processes.

The ASIC letter notes that while it is focussed on death benefit claims handling, many of the insights are equally applicable to the governance of other member services provided by trustees.

ASIC: new enforcement priorities

ASIC has announced its enforcement priorities for 2025, capturing the key areas where it will direct resources and expertise in the coming year.

As relevant to superannuation, these will include a focus on misconduct exploiting superannuation savings, member services failures in the superannuation sector, licensee failures to have adequate cyber-security protections, and greenwashing and misleading conduct involving ESG claims

ASIC notes that while its strategic targets change from year to year, in keeping with shifting economic factors and the volatile risk environment, its enduring priorities remain the same. ASIC’s enduring priorities target:

misconduct damaging market integrity including insider trading, continuous disclosure breaches and market manipulation

misconduct impacting First Nations people

misconduct involving a high risk of significant consumer harm, particularly conduct targeting financially vulnerable consumers

systemic compliance failures by large financial institutions resulting in widespread consumer harm

new or emerging conduct risks within the financial system

governance and directors’ duties failures.

Climate change risk: APRA survey results

APRA has published the findings of its second climate risk self-assessment survey, which provide insights into how regulated entities identify, manage and disclose the financial risks of climate change and align their practices with the Prudential Practice Guide CPG 229 Climate Change Financial Risks.

The voluntary survey builds on a smaller survey conducted with large entities in 2022. This time, all APRA-regulated banks, insurers and superannuation trustees were invited to participate, with responses received covering over half of the entities.

APRA has indicated the self-assessed results were broadly aligned with its expectations. While larger entities have continued to improve their climate risk maturity on average, broad variations remain. There are areas for improvement and a need to see greater convergence towards leading practice over time. Smaller entities generally reported lower climate risk maturity. APRA noted that the average level of climate risk maturity for superannuation trustees is broadly unchanged since 2022.

APRA is urging all regulated entities to consider the findings, reflect on their own preparedness and implement leading practice for managing climate risk. APRA highlighted in its 2024-25 Corporate Plan that it would increase its expectations for regulated entities to consider climate risks in their decision-making. APRA will elevate climate within the regulatory and supervisory landscape, including consulting on amending Prudential Standards CPS 220 and SPS 220 Risk Management to include climate risk in 2025.

Bills Update

The Senate Legal and Constitutional Affairs Committee has tabled the:

Report from its inquiry into the Privacy and Other Legislation Amendment Bill 2024
Report from its inquiry into the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024.

The Parliamentary Joint Committee on Intelligence and Security has tabled the report from its inquiry into the Cyber Security Bill 2024, the Intelligence Services and Other Legislation Amendment (Cyber Security) Bill 2024 and the Security of Critical Infrastructure and Other Legislation Amendment (Enhanced Response and Prevention) Bill 2024.

In each report, the Committee recommended the relevant Bill(s) be passed with a number of amendments.

ASFA REGULATORY WATCHLIST

ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.