Issue 826, 28 September 2021
In this issue:
- Retirement income covenant: consultation on draft legislation
- Treasury portfolio laws: miscellaneous amendments consultation
- APRA Superannuation Data Transformation: lodgement extension and FAQs
- APRA policy priorities updated
- Competition in the funds management industry: research report
Retirement income covenant: consultation on draft legislation
Treasury has released exposure draft legislation to introduce a retirement income covenant for superannuation trustees, as proposed by the Government in its 2018-19 Budget.
The Government intends that the retirement income covenant will support retirees to have the confidence to spend their hard-earned savings, while enabling choice and competition in the retirement phase of superannuation.
The draft legislation proposes to codify the obligation for superannuation trustees to have a retirement income strategy that outlines how they plan to assist their members in retirement. The strategy must consider how the trustee will assist their members to balance maximising their retirement income, managing risks, and have some flexible access to savings.
This exposure draft reflects the feedback received in response to the position paper released in July (see ASFA Action issues 814, 671 and 669 for background in relation to the covenant).
Subject to the passage of legislation, the covenant will take effect from 1 July 2022.
If you have any feedback you would like ASFA to consider in relation to the draft legislation, please forward it to Fiona Galbraith by close of business Friday 8 October.
Treasury portfolio laws: miscellaneous amendments consultation
Treasury has released a package of draft legislation and regulations that propose amendments to a range of Treasury portfolio laws, including several amendments relevant to superannuation.
The proposed measures affect topics, including:
- amendments to superannuation funds’ disclosure obligations in the Corporations Regulations 2001, to formalise (with some amendments) long term performance reporting measures implemented via class order in 2010
- correction of a typographical error in the legislative instrument setting the APRA supervisory levy
- amendments to the breach reporting rules in the Corporations Act 2001
- amendments to the Corporations Act and Regulations in relation to statements of advice and cooling off provisions
- amendments to regulations around recovery of overpayments of unclaimed superannuation
- amendments to the legislation imposing the Payment Times Reporting Scheme, which requires large businesses—including superannuation funds—to report on their small business payment terms and times, via a public register (see ASFA Action issue 786 for background).
If you have any feedback you would like ASFA to consider in relation to the consultation package, please forward it to Fiona Galbraith by close of business Friday 8 October.
APRA Superannuation Data Transformation: lodgement extension and FAQs
As reported in recent ASFA Actions, APRA has finalised ten data reporting standards under phase 1 of its multi-year Superannuation Data Transformation (SDT) project and has been publishing frequently asked questions (FAQs) about the new reporting requirements.
ASFA understands that APRA yesterday communicated to registrable superannuation entity (RSE) licensees regarding the due date for lodgement of a number of the SDT reporting forms. In particular, APRA advised that in order to ensure licensees can submit quality data for the initial submissions, the due date for submission of data has been extended to 28 October 2021 for the following 12 SDT reporting forms that were previously due by 30 September:
- SRF 251.0 – Insurance arrangements
- SRF 251.1 – Insurance coverage
- SRF 251.2 – Insurance payments
- SRF 251.3 – Insurance premiums
- SRF 332.0 – Expenses
- SRF 550.0 – Asset allocation
- SRF 605.0 – RSE structure
- SRF 606.0 – RSE profile
- SRF 611.0 – Member accounts
- SRF 705.0 – Component of net return
- SRF 705.1 – Investment performance and objectives
- SRF 706.0 – Fees and costs disclosed.
APRA has also provided an extension to the due date of any ad-hoc submissions and attestations of data on the SDT forms that are due prior to 28 October, so these will now be due by 28 October.
RSE licensees that are in a position to submit data earlier are encouraged to do so. In particular, APRA encourages RSE licensees to submit data on these forms via APRA Connect with sufficient time to ensure that any submission issues can be resolved ahead of the revised due date.
ASFA also understands that APRA has made changes to the APRA Connect artefacts to reflect the final reporting standards, therefore it is important for members to check the APRA Connect artefacts. These artefacts, along with the up-to-date data dictionary, validations, reporting taxonomy and XSD files (used to validate submissions uploaded to APRA Connect) are available on APRA’s website.
APRA has also published additional FAQs to clarify reporting issues in relation to the SDT reporting standards, on 23 and 27 September. The former release included updates to the SRS 251.0 Insurance worked example, while the latter reflects the communication to RSE licensees regarding the lodgement extension.
If ASFA members have any queries regarding the SDT reporting forms or the lodgement extension, these can be directed to DataAnalytics@apra.gov.au.
APRA policy priorities updated
APRA has issued an update to its policy priorities for the remainder of 2021.
Of particular relevance to superannuation, the update indicates that:
- the prudential standard and guidance for insurance in superannuation (SPS 250/SPG 250) will be finalised this year and is expected to become effective in 2022
- there will be consultation on amendments to the prudential standard for investment governance (SPS 530) and audit (SPS 310) this year, with the expected dates for finalisation and commencement to be advised
- there will be consultation on amendments to the prudential standards on strategic planning and member outcomes (SPS 515), governance (SPS 510), risk management (SPS 220), conflicts of interest (SPS 521) and fit and proper (SPS 520) in 2022, with the commencement dates for these amendments to be advised.
The update also indicates revised dates for cross-industry standards and guidance relevant (or potentially relevant) to superannuation, including:
- final guidance managing the financial risks of climate change will be released this year
- remuneration guidance (CPG 511) will be finalised this year however the standard on remuneration disclosure requirements (CPS 511) has been deferred — consultation will now take place in 2022 with commencement in 2023
- consultation on operational resilience will occur in 2022 and it is expected to commence in 2024.
Competition in the funds management industry: research report
ASIC has released a report on the state of competition in Australia’s funds management industry, based on research it commissioned from Deloitte Access Economics (Deloitte). The research examined competition between fund managers, with a focus on outcomes delivered to investors in retail managed investment products.
Report 702 Competition in funds management contains the findings from the research, including:
- retail investors are a small fraction of funds under management, at five per cent, but the managed funds industry affects a much larger number of Australians through superannuation
- the managed funds industry is competitive, as evidenced by new market entrants, innovation and low fees by global standards
- there is no single source of truth that allows for direct comparison between funds
- retail and wholesale investors are sensitive to the performance of funds. Economic transaction costs affect investors’ decisions to buy, sell and change managed funds, but these costs are not always transparent and may lead to investors remaining in underperforming funds
- retail investors are not highly engaged with funds management. There are many intermediaries between fund managers and retail investors, and this can create conflicts of interest
- there is competition between fund managers on fees and discounts. However, retail investors may not receive the full benefits of competition due to principal-agent issues and issues around transparency
- some participants in the managed funds industry have conflicts of interest, and this could affect outcomes for retail investors.
ASIC has indicated it will take these findings into account in its ongoing work to support effective competition in the funds management industry and to improve investor outcomes.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
