Issue 878, 15 November 2022
In this issue:
Successor fund transfer planning: APRA consultation on proposed enhancements
APRA has released a Discussion Paper on proposed measures to enhance planning by superannuation trustees in the event they need to transfer members out of – or into – their fund. The proposals are aimed at ensuring trustees prepare for, manage and execute successor fund transfers (SFTs) more smoothly and efficiently.
The proposals have been prompted by a period of heightened transfer activity in the industry, which has been amplified by APRA’s focus on combating underperformance through measures including the annual performance test and heatmaps.
To ensure SFTs achieve better outcomes for members, APRA has proposed updating the prudential framework to introduce new requirements:
- for all trustees to be prepared for a future transfer of members, elevating what was previously guidance
- relating to the transfer of MySuper assets within 90 days in the event that APRA cancels a trustee’s authority to offer a MySuper product.
APRA will also look to strengthen and simplify the transfer planning guidance contained in Prudential Practice Guide SPG 227 Successor Fund Transfers and Wind-ups.
If you have any feedback you would like ASFA to consider in relation to the Discussion Paper, please forward it to Fiona Galbraith by close of business Friday 10 February.
Financial resources for risk events in superannuation: APRA consultation
APRA has released a Discussion Paper on proposed changes to improve how superannuation trustees manage financial resources to protect members from poor operational risk event outcomes.
The Discussion Paper proposes replacing the existing Prudential Standard SPS 114 Operational Risk Financial Requirement with enhanced obligations for trustees. These include:
- widening the scope of permitted use of financial resources held to manage operational risks
- reducing barriers to efficient use of these resources
- requiring trustees to adopt a more sophisticated risk-based approach to determining how much to hold.
At the core of the enhanced requirements will be a two-tiered model, consisting of:
- a baseline component, to ensure ready access to financial resources to fund recovery or exit activity
- an operational risk component, to spread the impact of operational risk fairly across different cohorts of members. The operational risk component will largely reflect the approach of the existing Operational Risk Financial Requirement (ORFR), but with greater flexibility.
If you have any feedback you would like ASFA to consider in relation to the Discussion Paper, please forward it to Fiona Galbraith by close of business Friday 17 February.
Information provided in response to the Discussion Paper will inform revisions to the prudential framework, with consultation on the draft standard and guidance expected to commence in mid-2023.
The Discussion Paper follows an earlier round of consultation on the current and emerging approaches for RSE licensees to maintain the financial resilience needed to protect members’ best financial interests (see ASFA Action issue 834).
Financial Counselling Industry Funding Model: DSS Consultation
The Department of Social Services (DSS) has announced a public consultation on the Financial Counselling Industry Funding Model.
The proposed industry funding model will collect and distribute voluntary contributions from industry to address unmet demand for financial counselling services. The model is anticipated to commence 1 July 2023.
The Discussion Paper recommends contributions for financial services – currently that does not include superannuation, but the Discussion Paper does refer to superannuation as a sub-sector and notes that 2.39 per cent of financial counsellors’ time can be traced to a superannuation.
The Discussion Paper outlines the proposed design of the model, informed by previous consultations with industry and financial counselling sector stakeholders. Feedback is being sought on discussion questions covering:
- principles to guide the development of the industry funding model
- quantum and calculation of initial funding requested from each sector for the first three years
- the length of the initial commitment from industry and proposed review point
- the mechanism to secure initial commitments to the model
- the characteristics, role and governance of the independent body
- evaluation of the industry funding model.
In addition to the discussion paper, the DSS will hold a range of consultation activities including targeted roundtables with subsectors that are the focus on the proposed model.
The DSS is seeking feedback by close of business Friday 16 December.
National Housing Infrastructure Facility: consultation on widened remit
Treasury has conducted a very brief consultation on amendments to broaden the remit of the National Housing Infrastructure Facility (NHIF), to provide flexibility for NHIF financing to be used to attract more private capital into the social and affordable housing sector, including from superannuation funds and other institutional investors.
The proposed amendments to the National Housing Finance and Investment Corporation Investment Mandate Direction 2018:
- seek to broaden the remit of the NHIF to allow it to be used to directly finance social or affordable housing projects in addition to financing housing-enabling infrastructure
- are intended to help address the housing and homelessness challenges and housing supply constraints currently facing Australia and improve access to safe and secure housing
- seek to implement an announcement made following the Government’s Jobs + Skills Summit in September (see ASFA Action issue 867).
The proposed amendments were open for consultation between 8 and 14 November.
Increased penalties for serious data breaches: Bill progress
As reported in ASFA Action issue 876, the Government has introduced into Parliament the Privacy Legislation Amendment (Enforcement and Other Measures) Bill 2022. The Bill to proposes significant increases to the maximum penalties for serious or repeated privacy breaches, as well as enhancements to the enforcement powers of the Australian Information Commissioner and the information sharing powers of the Commissioner and the Australian Communications and Media Authority.
The Bill has been passed by the House of Representatives without amendment and is awaiting introduction into the Senate.
Increase in penalty unit: Bill introduced
The Government has introduced into Parliament a Bill to increase the amount of a Commonwealth penalty unit from $222 to $275, as announced in the Budget on 25 October (see ASFA Action issue 875).
The increase, set out in the Crimes Amendment (Penalty Unit) Bill 2022, will apply to offences committed on or after 1 January 2023. The value of a penalty unit will continue to be indexed every three years to the Consumer Price Index, under current arrangements.
ASIC industry funding model: legislative instruments
ASIC has registered two legislative instruments relevant to its industry funding model:
- The ASIC (Supervisory Cost Recovery Levy—Annual Determination) Instrument 2022/890 specifies matters about the size and composition of ASIC’s regulated population and the metrics that apply to each industry sub-sector within that regulated population for the 2021-22 financial year
- The ASIC (Supervisory Cost Recovery Levy—Regulatory Costs) Instrument 2022/889 specifies ASIC’s regulatory costs and their attribution to each industry sub-sector for the 2021-22 financial year.
Objective and taxation of superannuation
The Assistant Treasurer and Minister for Financial Services, Stephen Jones MP, has confirmed that the Government intends to legislate the objective of superannuation, before ‘having a conversation’ about superannuation tax concessions.
In a speech to the AFR Wealth and Super Summit last week, Mr Jones noted that the tax treatment of superannuation has been the topic of public conversation:
“We need this conversation to continue.
But we cannot put the cart before the horse.
We will consult widely to inform a common, agreed objective for super.
Australians need to have their say.
With an objective that is settled, we can talk sensibly about tax.
Those who support the status quo will need to demonstrate how concessional tax arrangements for high balance super funds meet the common objective.
Those who argue for change will need to show how that approach meets the objective.
And the millions of fund members watching and participating in the debate will know it is framed around their interests and their dignity in retirement.
By having this national conversation, governments now, and into the future, will be held accountable for the stewardship of our system for the next 30 years and beyond.”
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
