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Issue 704, 5 April 2019 
In this issue: 

 

Protecting Your Super Package: regulations 

The Government has finalised the regulations to implement its Protecting Your Superannuation (PYS) package. 

The PYS package prevents trustees from providing insurance by default when an account has been inactive for more than 16 months. It also imposes caps and a prohibition on the charging of certain fees and expands the circumstances in which inactive, low-balance accounts must be transferred to the ATO for consolidation (see ASFA Action issues 699 and 698 for background). 

The Treasury Laws Amendment (Protecting Your Superannuation Package) Regulations 2019, registered this afternoon, address: 

The regulations commence on 6 April. 

If you require further information please contact Byron Addison on 02 8079 0834. 

 

 

Protecting Your Super Package: ASIC expectations about member communications 

ASIC has written to ASFA outlining its expectations on superannuation fund trustees when communicating with members in relation to the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019. 

These expectations particularly relate to initial insurance cancellation notices that are to be issued by 1 May to members whose MySuper or choice accounts are identified on 1 April as having been ‘inactive’ for a continuous period of at least six months. 

ASIC has requested that ASFA shares this information with our members, noting that despite time pressures it expects that trustees will communicate in a way that focuses on the interests of members. 

ASIC’s letter can be accessed from the member section of the ASFA website. 

 

 

Superannuation binding death benefit nominations and kinship structures 

Treasury has released a discussion paper on superannuation binding death benefit nominations and kinship structures. 

During the Royal Commission into evidence was heard about the Lockhart River community and the difficulties that some Aboriginal and Torres Strait Islander people faced when accessing their superannuation entitlements due to complexities associated with Indigenous kinship structures. In his Final Report, Commissioner Hayne urged “consultation with relevant Aboriginal and Torres Strait Islander people about whether they, as the relevant users of the system, see difficulties about binding death benefit nominations that should be met”. 

The discussion paper explores the law surrounding the distribution of superannuation death benefits, Aboriginal and Torres Strait Islander peoples’ kinship structures and how these kinship structures are accommodated elsewhere in the law. 

The consultation process aims to identify if any law changes are required to address how the kinship structures of Aboriginal and Torres Strait Islander communities are treated by laws applying to superannuation death benefits. 

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, 17 May. 

 

 

ASIC industry funding levy: indicative levies for 2018-19 

ASIC has published estimated industry sector levies for 2018-19 as well as details on how it allocated its regulatory costs in 2017-18, as part of the its draft Cost Recovery Implementation Statement (CRIS). 

The CRIS provides transparency of ASIC’s costs and how these costs are allocated to industry under the industry funding model. 

The CRIS includes indicative levies for ASIC’s regulatory costs in the 2018-2019 financial year and shows that ASIC currently anticipates collecting levies of $13.725 million from superannuation trustees. The indicative levy amounts are, however, likely to change when ASIC’s regulatory costs are known and published in December 2019. Levies for 2018-19 will be billed in January 2020. 

ASIC is seeking comments on the CRIS by 26 April 2019. 

 

 

Status of superannuation bills 

Parliament has now completed what is expected to be its final sitting before the Federal Election. 

When Parliament rose, progress had been made on a number of bills relevant to superannuation. In particular, a number of bills have completed their passage through Parliament and await Royal Assent: 

Bills still before Parliament when it is prorogued for the election will lapse. 

 

 

AFCA: new obligation for financial firms to cooperate 

The Government has made regulations requiring members of the Australian Financial Complaints Authority (AFCA) to cooperate with AFCA in relation to complaints made to the AFCA Scheme. The regulations implement one of the recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 

In its final report, the Royal Commission noted the absence of a conduct-related obligation on financial firms that are required to use the AFCA scheme as an external dispute resolution body (recommendation 4.11). 

The Government has now made the Treasury Laws Amendment (AFCA Cooperation) Regulations 2019 to address this. The Regulations prescribe obligations on the financial firms that are compulsory members of AFCA to ensure that firms are required to: 

Where a financial firm does not satisfy these requirements, AFCA can refer the matter to the ASIC. 

The new requirements apply to all financial firms, including to trustees of APRA-regulated superannuation funds. However, they will not apply to complaints that are ‘superannuation complaints’ within the specific definition in the Corporations Act 2001. This is because ‘superannuation complaints’ are dealt with in specific provisions in the Corporations Act which already provide a statutory power to AFCA to obtain information and documents to resolve superannuation complaints and to ensure compliance with any determinations made by AFCA. 

The different treatment of superannuation complaints is because superannuation complaints may include third parties who are not members of the AFCA scheme but have information relevant to the resolution of the complaint. The new requirements would apply, however, where a superannuation trustee is party to a complaint before AFCA that falls outside the specific definition of ‘superannuation complaint’. 

The new obligation to cooperate applies to complaints made before, on and after commencement of the regulation. However, it is prospective and does not have retrospective effect in relation to past failures by members to cooperate with AFCA. 

 

 

Financial advice: ASIC report on consumer comprehension 

ASIC has released research confirming that many consumers are confused about the distinction between ‘general’ and ‘personal’ advice. 

The ASIC report, Financial advice: Mind the gap (REP 614), presents new independent research on consumer awareness and understanding of general and personal financial advice, identifying substantial gaps in consumer comprehension. 

The report highlights the importance of consumer awareness and understanding of the distinction between personal and general advice with the Future of Financial Advice (FOFA) protections only applying when personal advice is provided. These include obligations for advisers to act in their cli best interests, to provide advice that is appropriate to their client’s personal circumstances and to prioritise their client’s interests. These obligations do not apply when general advice is provided. 

ASIC Deputy Chair, Karen Chester said the survey ”not only revealed consumers are not familiar with the concepts of general and personal advice, but only 53 per cent of those surveyed correctly identified ‘general’ advice. And even when provided the general advice warning, nearly 40 per cent of those surveyed wrongly believed the adviser had an obligation to take their personal circumstances into account”. 

Ms Chester said the survey results also indicate that the responsibilities of financial advisers, when providing general advice, are not well understood: “Nearly 40 per cent of those surveyed were unaware that advisers were not required by law to act in their clients’ best interests”. 

ASIC anticipates the need for financial advice to grow, reflecting an ageing population and many financial products, especially retirement products, becoming more complex. ASIC reports that much of the advice is likely to be general advice, and while appropriate in some circumstances, it is inevitably of limited use. 

The report’s findings reinforce those of the Murray Financial System Inquiry and the Productivity Commission reports on the financial and superannuation systems. Those reports made recommendations about the use of the term ‘general advice’, which is likely to lead to false consumer expectations as to the value of and protections afforded by advice received. 

The report is the first stage in ASIC’s broader research project into consumer experiences with, and perceptions of, the financial advice sector. Additional research by ASIC will commence in 2019 to identify a more appropriate label for general advice and consumer-test the effectiveness of different versions of the general advice warning. 

 

 

Life insurance claims handling: ASIC and APRA data and comparative tool 

APRA and ASIC have released a series of publications and an online tool allowing policyholders to compare life insurers’ performance in handling claims and disputes. 

The joint project is the result of a project aimed at collecting and publishing higher-quality, more consistent and transparent data about the life insurance industry. It enables the community to review an individual life insurer’s claims and disputes outcomes, and compare them with other providers. The data release signifies a new level of transparency and accountability which the regulators see as essential to improving trust in financial services. 

The release comprises: 

The publications reflect the agencies’ different roles, with APRA focused on protecting policyholders by ensuring the soundness and stability of institutions, and ASIC responsible for regulating conduct, disclosure and consumer outcomes. 

The data shows that 92 per cent of overall claims are paid in the first instance, and breaks down consumer outcomes according to cover type and distribution channels – including for insurance cover provided through a superannuation fund. 

The data will be collected on an ongoing basis, and the resources will be updated twice yearly. 

 

 

New APRA data collection solution: implementation plan released 

APRA has released an initial implementation plan for the rollout of a new data collection solution to be used by all entities that report data to APRA, replacing the current Direct to APRA (D2A) system. 

APRA’s Executive General Manager, Risk & Data Analytics Division, Sean Carmody, has indicated that the new system is expected to go live in March 2020. A vendor has been selected to supply and deliver the new data collection solution. 

 

 

AML/CTF: certification of documents 

AUSTRAC has registered amendments to the rules supporting the anti-money laundering and counter-terrorism financing (AML/CTF) regime, reflecting recent changes to regulations governing Commonwealth statutory declarations. 

In September 2018 the Statutory Declarations Regulations 2018 were registered, replacing a version dating from 1993. These regulations updated the occupations and persons before whom a statutory declaration can be made and clarified and updated a number of other definitions and provisions (see ASFA Action issue 686) 

Commonwealth statutory declarations are frequently used for a range of purposes including verification of personal information and as substantiating documents for some types of superannuation claims. In addition, those authorised to witness a Commonwealth statutory determination are typically also able to certify documents, for example as proof of a person’s identity. 

AUSTRAC has now made the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2019 (No. 2). This instrument amends the definition of ‘certified copy’ in the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) to refer to the Statutory Declarations Regulations 2018. The amendment commenced on 4 April. 

 

 

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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