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Issue 550, 30 October 2014 

In this issue: 

 

APRA releases draft guidance on superannuation fraud risk management 

APRA has released for consultation a draft prudential practice guide that provides guidance on good practices for registrable superannuation entity (RSE) licensees in relation to fraud risk management. 

As part of the new superannuation prudential framework supporting the government’s Stronger Super reforms, APRA introduced Prudential Standard SPS 220 Risk Management (SPS 220) in late 2012. Prudential Practice Guide SPG 220 Risk Management was subsequently released in 2013 to support the requirements set out in SPS 220. 

At that time, APRA foreshadowed it would update its existing guidance notes on the management of superannuation fraud risk: How to Reduce the Risk of Fraud – A Best Practice Guide for Trustees and Superannuation Fraud Checklist for Trustees, through the issue of a prudential practice guide. This aligns with APRA’s risk-based approach of providing up-to-date and practical guidance on matters that APRA-regulated entities may consider relevant in meeting the requirements of the prudential standards. 

Draft Prudential Practice Guide SPG 223 Fraud Risk Management (SPG 223) outlines prudent practices in relation to the management of fraud risk, and focuses on current and emerging fraud risk factors impacting the superannuation industry from both an internal and external perspective. 

APRA Member Helen Rowell said “APRA remains focused on improving risk management practices across the superannuation industry, including fraud risk management. Draft SPG 223 substantially updates and expands upon APRA’s existing fraud risk guidance, to continue to drive improved practices in this important area.” 

Draft SPG 223 and an accompanying letter can be found on the APRA website. 

The deadline for submissions on draft SPG 223 is Monday, 19 January, 2015. 

If you have any comments that you would like ASFA to consider including in our submission, please forward them in writing to Jon Echevarria. 

 

Successor fund transfers and the new social security deeming rules for allocated pensions 

The social security system uses deeming to assess income from financial investments. From 1 January 2015, the deeming rules will be extended to include account-based income streams as a financial investment. 

Due to a grandfathering rule, this change will not affect account-based income streams held on 31 December, 2014 by a person who is an income support recipient on 31 December, 2014 (that is, existing income stream arrangements are grandfathered for existing income stream recipients). However, from 1 January 2015, if an income support recipient with an account-based income stream changes their pension provider then the pension will become subject to deeming. 

This raises the question of what happens under a successor fund transfer (SFT). The uncertainty arises because, although the transfer is involuntary ( it is not requested by the member), the practical effect is that the existing pension arrangement is terminated and a new pension commenced with the successor fund, albeit on equivalent terms and conditions. This is how it is treated for tax purposes. 

In response to questions from members, ASFA sought clarification from the Department of Social Services (DSS) on the impact of an SFT on an income support recipient with an account-based pension. 

DSS has responded, advising ASFA it has released a new information sheet on this topic. The information sheet states, in part, that for an SFT: 

“Where the transfer of an income stream to another fund was as per the SFT provisions of the Superannuation Industry (Supervision) Act 1994, the new income streams are treated as though they are a continuation of the original income streams.” 

That is, for income streams that have been grandfathered under the 1 January, 2015 change that extends the social security deeming provisions to account-based income streams, a successor fund transfer will not change the social security assessment of the income stream. 

The information sheet also sets out Department of Human Services Centrelink requirements for superannuation providers with respect to advising the income stream recipient of the change in ownership. 

 

Government announces new register of financial advisers 

The government has announced that a register of financial advisers will be established, which will enable people to search a register of all financial advisers working in Australia. 

Currently, there is no central record of who works as a financial adviser, what their qualifications are or where they have worked in the past. To help drive improvements in consumer confidence in the financial advice industry and ensure people receive advice they can trust, the government has committed itself to the establishment of an industry-wide public register of financial advisers. 

The register will be available by March 2015 and will be run by the Australian Securities and Investments Commission (ASIC). This register will enable investors, employers and ASIC to verify the credentials of financial advisers and be confident that they are appropriately qualified and experienced. 

The detail and content of this register has been informed by the recommendations of an expert industry working group convened by the government, which included relevant financial services industry stakeholders, as well as consumer and academic representatives. 

The register will include: 

 

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