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Issue 712, 25 June 2019 
In this issue: 

 

APRA approval of changes in control of super trustees: consultation 

APRA has released consultation drafts of a form and guide for applications to acquire a controlling stake in a registrable superannuation entity (RSE) licensee 

Under reforms contained in the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019, from 5 July, any party seeking to acquire greater than a 15 per cent stake in an RSE licensee must apply to APRA for approval. 

Deputy Chair Helen Rowell said APRA actively sought these powers to better protect the interests of superannuation members. “APRA has held longstanding concerns about the ability of parties to gain control of a superannuation licensee through the ‘back door’, without meeting the requirements of a stringent approval process”. Mrs Rowell said these concerns were “heightened after this loophole contributed to the fraud that precipitated the collapse of Trio Capital in 2009. The closure of this legislative gap will ensure anyone seeking to acquire a substantial stake in an APRA-regulated superannuation licensee is subject to rigorous regulatory scrutiny.” 

Before granting approval to a new applicant, APRA must be satisfied the revised ownership structure will not impede the ability of the RSE licensee to meet its obligations under the Superannuation Industry (Supervision) Act 1993, including by prioritising the best interests of members. 

APRA is seeking submissions on the draft application form and accompanying guide by 5 July. 

 

 

Fee and cost disclosure rules amended to reflect protecting your super reforms 

ASIC has amended the legislative instrument prescribing fee and cost disclosure rules for superannuation funds to reflect the element of the protecting your super (PYS) reforms that bans exit fees from 1 July 2019. 

Class Order 14/1252 modifies the Corporations Act 2001 and Corporations Regulations 2001 to set out requirements for the disclosure of fees and costs in Product Disclosure Statements (PDSs) for superannuation and managed investment products. From 1 July 2019, the reforms implemented by the Treasury Laws Amendment (Protecting Your Super Package) Act 2019 and associated regulations prohibit superannuation funds from charging exit fees. 

ASIC has now made ASIC Corporations (Amendment) Instrument 2019/599 to reflect the ban on exit fees, by eliminating the line allowing for disclosure of exit fees. According to ASIC, the amendment does not otherwise make any change to the requirements set out in CO 14/1252. 

ASIC has also reminded product issuers that as part of their implementation of the PYS reforms, they must take care that, from 1 July 2019, PDSs do not suggest that exit fees will be charged on superannuation products. Product issuers should also implement any changes necessary to ensure that no exit fees are charged in practice. ASIC has indicated that it understands some issuers may have difficulty implementing changes to delete the line about exit fees from their template by 1 July (although it will be blank) and encourages them to make this change as soon as possible. 

ASIC’s broader review of the fees and costs disclosure regime for superannuation and managed investment schemes (see ASFA Action issue 696) is continuing and will not affect the requirement to comply with the PYS amendments and CO 14/1252. ASIC has been considering its response to submissions made in relation to its proposed disclosure changes and expects to provide a report addressing its final position in the second half of 2019. 

 

 

AFCA: rules and guidelines for legacy complaints 

ASIC has approved changes to the governing rules of the Australian Financial Complaints Authority (AFCA), expanding AFCA’s jurisdiction to cover complaints dating back to 1 January 2008 (‘legacy complaints’). 

Under the extension of jurisdiction, AFCA will be able to deal with certain complaints about conduct by current member financial firms, which AFCA, its predecessor schemes, courts, or tribunals have not previously dealt with. In particular, the amended Rules specify that an eligible legacy complaint: 

The concept of ‘excluded complaint’ specifically excludes complaint in relation to a superannuation death benefits, but does not exclude any other types of superannuation complaints (for example, disability complaints). 

The extension of AFCA’s jurisdiction represents part of the Government’s response to the Royal Commission (see ASFA Action issues 699, 700 and 701). 

AFCA has noted that it will accept legacy complaints from 1 July 2019 and follow its usual practice of referring them back to the financial firms to resolve them. CEO David Locke said AFCA expects that financial firms—including superannuation trustees—“will proactively resolve these legacy matters themselves where possible, as part of their commitment to justly remediate the misconduct of the past and meet the community’s expectations of fairness.” Where firms are unable to satisfactorily resolve the complaints, AFCA will start investigating these matters from 1 October 2019. 

The updates to AFCA’s rules and operational guidelines are expected to be available on its website shortly. 

 

 

Family law superannuation interest rate determination 

The Australian Government Actuary has made the Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2019. The Determination sets the interest rate for adjusting the superannuation entitlements of separated and divorced spouses under splitting orders and agreements made under the Family Law Act 1975. 

The interest rate for the adjustment period that comprises the financial year beginning on 1 July 2019 is 4.8 per cent. The Determination also provides the method by which the interest rate is calculated for an adjustment period that includes a period within that financial year. 

 

 

Lifetime income streams: means test 

The Department of Social Services (DSS) and the Department of Veterans’ Affairs (DVA) have made a package of determinations relevant to determining the value, for social security purposes, of lifetime income streams. 

In the May 2018 Budget, the Government  announced that it would implement new means test rules for lifetime income streams, to assess a fixed 60 per cent of all pooled lifetime product payments as income. Under the proposed rules, 60 per cent of the purchase price of the product would be assessed as assets until the age of 84 years, or a minimum of 5 years, and then 30 per cent for the rest of the person’s life. Grandfathering would apply for income streams purchased before 1 July 2019. 

The DSS and DVA have now made the following legislative instruments to give effect to the new means test rules, with effect from 1 July 2019: 

 

 

Some important superannuation changes commencing 1 July 2019 

While superannuation trustees have understandably been focused on the commencement of the ‘protecting your super’ reforms, a number of other superannuation changes also take effect from 1 July. These include: 

 

 

ASFA REGULATORY WATCHLIST

ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations

and other regulatory announcements relevant to superannuation.

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