Issue 834, 23 November 2021
In this issue:
- Strengthening financial resilience in superannuation: consultation
- Superannuation calculators and retirement estimates: consultation
- Consumer remediation guidance: consultation
- Improving the technology neutrality of Treasury portfolio laws: consultation
- ASIC industry funding: 2020-21 levy instruments
- Critical infrastructure reforms: Bill passed by Parliament
- AFCA: new dispute resolution benchmarking platform
Strengthening financial resilience in superannuation: consultation
APRA has released a discussion paper seeking information from superannuation trustees on their plans to maintain the financial resilience needed to protect members’ best financial interests.
APRA has noted that its prudential standards require superannuation trustees to maintain sufficient financial strength to operate their businesses effectively, including in cases of unexpected expenses such as systems upgrades, corporate restructures or paying fines. Through the discussion paper, APRA is seeking feedback on:
- the use of the operational risk financial requirement (ORFR)
- reserving practices
- protections afforded to trustees via insurance.
The discussion paper outlines key principles for fee setting and design, informed by the law as it currently stands. As applications seeking judicial advice are still before the Courts, APRA notes that matters relating to the charging of trustee fees and management of financial resources are likely to continue to evolve over the coming months. APRA Executive Board Member Margaret Cole said:
“Australia’s superannuation system is served by a variety of business models that use a range of tools to bolster their financial position: from charging fees, to receiving an injection of capital or utilising fund reserves.
What they all have in common is an obligation to make sure they have the resources, systems, processes and expertise to protect their members’ best financial interests at all times. This requires trustees to undertake sufficiently robust business and contingency planning to ensure they retain access to adequate financial resources, including when unexpected costs arise.
In light of recent changes, we want to know more about how adequately resourced trustees are, how they are making financial projections in business planning practices, and what is their provisioning for contingencies. The imminent change to the law regarding the use of fund reserves to pay financial penalties will cause some trustees to rethink their current structures and approach. We are particularly keen to learn more, through this consultation, about how trustees are planning to change current practices”.
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 11 February.
Superannuation calculators and retirement estimates: consultation
ASIC has released a consultation package detailing proposed updates to its existing relief and guidance for superannuation calculators and retirement estimates.
Superannuation trustees and other entities that provide these tools to consumers within the terms of ASIC’s longstanding relief, Class Order [CO 11/1227] and ASIC (Generic Calculators) Instrument 2016/207, are exempt from certain licensing and disclosure requirements associated with providing personal financial advice.
ASIC’s consultation package comprises Consultation Paper CP 351 Superannuation forecasts: Update to superannuation calculators and estimates relief, a draft regulatory guide and a draft legislative instrument.
The package outlines ASIC’s proposals to:
- continue providing relief from personal financial advice requirements for persons who provide superannuation calculators and for superannuation trustees who provide retirement estimates to their members
- adopt a single framework for how calculators and retirement estimates may be provided under the relief, which will require trustees to have greater consistency between the assumptions used across their retirement estimates and superannuation calculators
- set standard assumptions for retirement ages and inflation rates that must be used as the defaults, to foster consistency across the industry
- give greater flexibility to trustees to tailor forecasts based on their members’ investment strategies.
ASIC intends to publish the updated instruments and guidance before the existing relief in [CO 11/1227] sunsets (expires) on 1 April.
If you have feedback you would like ASFA to consider in relation to this consultation, please forward it to Ross Clare by close of business Monday 10 January.
Separately, ASFA will establish a working group to consider the consultation package. A meeting of the working group will be convened before the end of this year. If you would like to be involved in the working group, please contact Andrew Craston by close of business Tuesday 30 November.
Consumer remediation guidance: consultation
ASIC is undertaking further consultation on updated and expanded regulatory guidance dealing with the way Australian financial services licensees, credit licensees and retirement savings account providers should conduct remediations to return money owed to consumers.
Consultation Paper CP 350: Consumer remediation: further consultation follows an earlier consultation paper CP 335 (see ASFA Action issue 786) and includes a new draft regulatory guide (currently unnumbered). ASIC has also published REP 707, outlining its response to the submissions received from industry in relation to the CP 335.
ASIC Deputy Chair Karen Chester said “We want our new guidance to help firms remediate with greater confidence and speed. Importantly, we have expanded our guidance to cover all financial services licensees, credit licensees and retirement service providers. Our draft guidance sets out how all licensees should act to ensure their remediations are conducted efficiently, honestly and fairly”.
If you have any feedback you would like ASFA to consider in relation to CP 350 and the new draft regulatory guide, please forward it to Helena Gibson by close of business Friday 28 January.
Improving the technology neutrality of Treasury portfolio laws: consultation
Treasury has released a package of exposure draft legislation and regulations to modernise business communications by improving the technology neutrality of Treasury portfolio laws.
The consultation follows on from an earlier consultation on the Government’s proposals to modernise business communications (see ASFA Action issues 800 and 789) and the recent introduction of the Corporations Amendment (Meetings and Documents) Bill 2021 (see ASFA Action issue 830).
The consultation package proposes only minor amendments to superannuation-specific legislation to remove redundant and spent provisions, particularly in relation to APRA licensing rules.
However, some of the proposed amendments will be relevant to superannuation fund trustee companies in relation to satisfying their general (corporate) obligations under the Corporations Act 2001. For example, the proposed amendments will expand the scope of the global regimes, proposed in the Corporations Amendment (Meetings and Documents) Bill 2021, that allow documents to be signed and sent electronically. Under the reforms, all documents which are required or permitted under the Corporations Act can be signed electronically and certain additional categories of documents can be sent electronically and in hard copy.
Treasury is seeking comments on the consultation package by close of business Friday 10 December.
The Government has indicated that it will, in the next phase of the modernising business communications project, consider further reforms to improve technology neutrality including:
- communicating with regulators
- exemptions to the Electronic Transactions Act 1999
- product disclosure and recordkeeping requirements.
This later phase of the project is likely to directly impact how superannuation funds communicate with fund members and regulators.
ASIC industry funding: 2020-21 levy instruments
ASIC has registered two legislative instruments to set its cost recovery levies for 2020-21:
- The ASIC (Supervisory Cost Recovery Levy—Annual Determination) Instrument 2021/0936 specifies certain matters about size and composition of ASIC’s regulated population and of the metrics that apply to each industry subsector within that regulated population for the 2020-21 financial year.
- The ASIC (Supervisory Cost Recovery Levy— Regulatory Costs) Instrument 2021/0938 determines ASIC’s regulatory costs and their attribution to each industry sub-sector for the 2020-21 financial year to facilitate the collection of industry levies to recover those regulatory costs. The instrument states that ASIC’s regulatory costs for 2020-21 are $314,092,158 of which $26,947,964 is attributed to the ‘superannuation trustees’ sub-sector.
Together, the two instruments provide ASIC with the figures to enable it to calculate the levies payable by each leviable entity for the 2020-21 financial year. ASIC will use the figures in these instruments in preparing the invoices for the levies which will be sent out to the industry in January 2022.
Critical infrastructure reforms: Bill passed by Parliament
A Bill to implement significant reforms to the existing regulatory regime for critical infrastructure assets has been passed by Parliament and now awaits Royal Assent. The Bill expands the definition of critical infrastructure sectors to cover 11 sectors of the economy, including the financial services sector.
As reported in ASFA Action issue 830, the Security Legislation Amendment (Critical Infrastructure) Bill 2021 was substantially amended by the House of Representatives, with preventative measures and the design of the Risk Management Programs, Systems of National Significance and Enhanced Cyber Security Obligations removed for inclusion in a later Bill.
The Bill was passed by the Senate yesterday without further amendment.
AFCA: new dispute resolution benchmarking platform
The Australian Financial Complaints Authority (AFCA) has launched a new digital platform to help financial firms better manage disputes that reach the ombudsman service.
The AFCA Member Benchmarking Dashboard is an interactive platform for financial firms that will provide near real-time complaints data to give firms a greater understanding of their complaints, including how quickly they are being resolved. It will also enable firms to compare their performance against an anonymised set of similar financial firms.
The new dashboard will be released to AFCA members in phases during November and December.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
