Issue 710, 7 June 2019
In this issue:
- Proposed financial institutions supervisory levies for 2019-20: consultation
- Protecting your super: public awareness campaign
- Protecting your super: updated APRA guidance
- Superannuation and retirement calculators: assumed inflation rate
Proposed financial institutions supervisory levies for 2019-20: consultation
Treasury has issued a consultation paper seeking submissions on the proposed financial institutions supervisory levies that will apply for the 2019-20 financial year.
The financial institutions supervisory levies are set to recover the operational costs of APRA and other specific costs incurred by certain Commonwealth agencies and departments, including the ATO.
The paper reflects funding announcements in the Mid-Year Economic & Fiscal Outlook in December (see ASFA Action issue 695) and the Budget on 2 April (see ASFA Action issue 703). In particular, the proposed levies include additional funding for APRA in relation to implementation of recommendations from the Royal Commission and an allocation of $8.4 million to ASIC in relation to the operation and wind-down of the Superannuation Complaints Tribunal.
If you have any feedback on issues you would like ASFA to consider including in our submission, please forward it to Fiona Galbraith by close of business, Wednesday 12 June.
Protecting your super: public awareness campaign
A public awareness campaign highlighting potential insurance impacts of the protecting your super (PYS) reforms will commence shortly and run throughout June.
The PYS reforms, which take effect 1 July 2019, will mean that funds can no longer provide insurance on accounts which have not had a contribution in the preceding 16 months, unless the member actively opts to retain their cover.
Despite the considerable effort funds have made to communicate these changes to their members, there is a concern that many fund members do not realise the changes will affect them and the timeframe for them to opt in is very tight.
ASFA has worked with a number of members—insurers and fund trustees—as well as with the Financial Services Council to develop a public awareness campaign. This aims to drive Australians to check whether their insurance through superannuation will be impacted as a result of the PYS changes and educate them on how to make a choice.
The objectives are to:
- create broad based awareness and understanding around the effects of the changes on 1 July
- engage relevant audiences, drive them to consider their own situation and check whether it impacts them (specifically to encourage them to open mail, emails or read SMS from their fund)
- educate impacted members on the options available, the effect of these and what they should do to action their choice.
Importantly, the messaging will provide balanced education on the available options, without steering or influencing the decision. As part of the campaign:
- video and online content will run across multiple channels including digital, social and broadcast during the month of June, with a target of reaching 12.3 million Australians
- the story will also be pitched to news outlets.
The campaign will commence Friday, 7 June and will run until the end of June. Fund members will be encouraged to look at their fund’s communications first but if they require further information they will be directed to a microsite at timetocheck.com.au.
If you have any questions about the PYS public awareness campaign please contact Byron Addison, Senior Policy Adviser, on 02 8079 0834.
Protecting your super reforms: updated APRA guidance
As outlined in ASFA Action issue 708, APRA recently published a number of Frequently asked questions (FAQs) on the implementation of the PYS reforms. APRA has now updated its FAQs in relation to:
- fees charged to superannuation members (section 1 of the FAQs)
- insurance for inactive accounts (section 2 of the FAQs).
The FAQs are available on the APRA website.
Superannuation and retirement calculators: assumed inflation rate
ASIC has made a legislative instrument setting the assumed inflation rate that must be used in superannuation and retirement calculators, to be eligible for relief from certain licensing, conduct and disclosure obligations under the Corporations Act 2001.
ASIC issued ASIC Corporations (Generic Calculators) Instrument 2016/207 in April 2016. This instrument updated and continued relief from a range of legislative obligations for providers of generic financial calculators. A generic financial calculator is a facility, device, table or similar facility that is used to make a numerical calculation or find out the result of a numerical calculation about a financial product and does not advertise or promote a specific financial product. A generic financial calculator involves financial product advice if it produces recommendations or statements of opinion that are (or could reasonably be regarded as being) intended to influence the user in deciding about a financial product or class of financial product.
Generic financial calculators would, without relief, be subject to a range of Corporations Act licensing, conduct and disclosure obligations. Instrument 2016/207 gave providers of generic financial calculators relief from these obligations where the provider takes reasonable steps to meet certain requirements. One of these requirements was that if a calculator provided an estimate of an amount payable or receivable at a future time of two years or more, it must display a clear and prominent statement setting out the present value of the estimate that is calculated using an assumed rate of inflation of 2.5 per cent. This requirement was initially intended to apply from 1 April 2017 but was ultimately deferred, for superannuation and retirement calculators, until 1 July 2019 (see ASFA Action issue 664).
ASIC has now made ASIC Corporations (Amendment) Instrument 2019/514 to amend the relief conditions. Instrument 2019/514 effectively gives providers of superannuation and retirement calculator the option of using an assumed inflation rate of 3.2 per cent or an alternative assumed inflation rate, as long as certain disclosure requirements are satisfied. This is achieved by replacing the definition of ‘present value’ in Instrument 2016/207 with a new definition.
The explanatory material accompanying Instrument 2019/514 indicates that 3.2 per cent is equivalent to the assumed inflation rate used by ASIC’s MoneySmart superannuation and retirement calculators. It reflects CPI of 2 per cent and real wage growth of 1.2 per cent, the latter of which reflects the cost of meeting increases in community living standards. ASIC intends to periodically update Instrument 2016/207 to reflect any changes in the default inflation rate used by ASIC’s MoneySmart superannuation and retirement calculators.
If a superannuation and retirement calculator uses an alternative assumed inflation rate to calculate the present value of estimates and that an alternative rate does not include a component that reflects the cost of meeting increases in community living standards, the calculator must display a clear and prominent statement:
- specifying that the present value of the estimate does not take into account the costs of meeting increases in community living standards; and
- explaining the implications of the present value not taking into account such costs.
The amendments made by Instrument 2019/514 apply from 5 December 2019. Until then, superannuation and retirement calculators must disclose whether or not estimates take into account changes in the cost of living.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
