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Issue 673, 30 May 2018 
In this issue: 

 

Productivity Commission draft report 

Following a three-stage review of the superannuation system commencing in 2016, the Productivity Commission has released its draft report, Superannuation: assessing efficiency and competitiveness. 

The draft report details the Commission’s view that Australia’s super system needs to adapt to better meet the needs of a modern workforce and a growing pool of retirees. In the Commission’s view, structural flaws—unintended multiple accounts and entrenched underperformers—currently harm a significant number of members. The Commission considers that fixing these issues could benefit members around $3.9 billion each year, with the balance for a new job entrant today lifted by $407,000 when they retire in 2064. 

The Commission’s assessment of the superannuation system revealed mixed performance: 

The Commission concluded that these outcomes have arisen due to inadequate competition, governance and regulation. In particular: 

The Commission has recommended a new way of allocating default members to products: 

The Commission considers that this approach is superior to other default models, as it sidesteps employers and puts decision making back with members in a way that supports them with safer, simpler choice. 

In the Commission’s view, these changes need to be implemented in parallel to other essential improvements: 

ASFA will be making a submission in response to the draft report. As was the case for previous stages of the Commission’s review process, ASFA will be consulting its membership, including through the ASFA Policy Councils. 

If you have any feedback that you would like ASFA to consider including in our response, please forward it to Andrew Craston by close of business Friday 22 June. 

 

 

Superannuation and victims of crime compensation: consultation 

The government has released for public consultation two draft proposals that would provide victims of crime with access to a perpetrator’s superannuation in certain circumstances. These involve: 

This follows an initial consultation into the early release of superannuation in December 2017 (see ASFA Action issue 656), which raised the question whether a perpetrator’s superannuation should be available to meet unpaid victims of crime compensation orders. 

The government is particularly interested in views on the likely effectiveness of the draft proposals, including their interaction with existing state and territory criminal and civil procedures. 

The consultation will close on 15 June. If you have any feedback you would like ASFA to consider in relation to the draft proposals please forward it to Fiona Galbraith by close of business Wednesday 6 June. 

 

 

Related party arrangements and conflicts of interest: APRA thematic review 

APRA has released the findings of its recent thematic review of related party arrangements for registrable superannuation entity (RSE) licensees, calling for greater focus by superannuation licensees on administering outsourcing arrangements with related parties to effectively manage conflicts of interest. 

APRA’s review, conducted over 2016 and 2017, was prompted by concerns that some licensees’ management of commercial relationships with related parties could detract from the outcomes delivered to their members. 

While RSE licensees had improved their handling of related party arrangements since APRA’s 2014 conflicts of interest thematic review, APRA found room for improvement, including: 

APRA has written to all RSE licensees to outline its observations and recommendations from the thematic review, which it says are relevant for all RSE licensees to consider with a view to ensuring their related party arrangements are in the best interests of members and contributing to the delivery of sound member outcomes. 

 

 

New body to boost financial capability 

The government has announced it will establish a new body to boost the advancement of financial capability. 

The new body, a not for profit public company independent of government, will administer grants and improve capabilities amongst Australians in relation to financial products and services. It is expected the body will seek deductible gift recipient status in order to enable it to receive tax-deductible donations from the public. It will also manage and distribute the $40 million in community benefit payments that form part of the settlement agreements between ASIC, ANZ and NAB, relating to the manipulation of the Bank Bill Swap Rate (and, potentially, future community benefit payments from enforceable undertakings that ASIC may agree to in future). The body will also manage the $10 million committed in the recent Federal Budget to developing women’s financial capability (see ASFA Action issue 669). 

The new body will be overseen by a board chaired by Paul Clitheroe AM, one of Australia’s leading voices and advocates on financial literacy. He will be joined by Elaine Henry OAM and Air Commodore Robert Brown AM. 

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said financial literacy and capability is “critical for economic empowerment, including for Australian women and young and older Australians”. The minister said the new body “will become Australia’s peak body in championing financial literacy and capability amongst Australians. It will use funds received as a result of corporate wrongdoing to educate and empower Australian consumers of financial products and advice”. 

The minister said the establishment of the body will also support other Government initiatives, including the National Financial Literacy Strategy, the Government’s Strategy to Boost Women’s Workforce Participation and the More Choices for a Longer Life package (which includes the retirement income framework proposals from the recent Budget – see ASFA Action issue 669). 

 

 

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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