Issue 773, 31 August 2020
In this issue:
- APRA Superannuation Data Transformation project: consultation
- Internal dispute resolution: expressions of interest for ASFA working group
- Superannuation bills update
- ASIC corporate plan
- COVID-19 Coronavirus: early release of super – APRA data
- COVID-19 Coronavirus: APRA Insight
APRA Superannuation Data Transformation project: consultation
APRA has resumed the consultation process on its Superannuation Data Transformation Project, after a break of several months due to the COVID-19 pandemic. As outlined in earlier issues of ASFA Action, the multi-year project will upgrade the breadth, depth and quality of APRA’s superannuation data collection.
APRA has released a package of four consultation topic papers to complete Phase 1 of the project, which looks at the breadth of its reporting:
- Topic Paper 4: Expense Reporting – this involves utilising a look-through approach to superannuation fund expenditure and establishing more granular and consistent reporting categories to enable more effective analysis and assessment of levels and types of expenditure
- Topic Paper 5: Asset Allocation – this involves expanding the reporting of asset allocation data to choice products and options, and collecting more granular and consistent MySuper data to provide a more complete picture of superannuation investments at the investment option level
- Topic Paper 6: Insurance Arrangements – this relates to collecting more data on insurance policies including premiums, claims payments and processing stages, as well as outcomes for members across different member cohorts, including occupation categories
- Topic Paper 7: Fees and Costs – this involves expanding APRA’s collection of fee and cost disclosure data to choice products and options, and providing key forward-looking drivers of member outcomes for all superannuation products.
A number of draft reporting standards and pilot data request templates have been published to accompany the Topic Papers. Each of the four consultation packages has a separate due date for submissions, ranging from 2 October to 13 November.
If you have any feedback that you would like ASFA to consider in relation to the consultation packages, please forward it to Fiona Galbraith by the following dates:
- Topic Paper 4: Expense Reporting – by close of business (COB) Friday 18 September
- Topic Paper 5: Asset Allocation – by COB Friday 2 October
- Topic Paper 6: Insurance Arrangements – by COB Friday 16 October
- Topic Paper 7: Fees & Costs – by COB Friday 30 October.
APRA intends to finalise the nine reporting standards linked to Phase 1 (taking into account standards included as part of consultations earlier this year) early next year, and will then commence Phase 2 of the project, looking at the depth of its reporting.
See ASFA Action issues 738, 736, 732 and 727 for background on the Superannuation Data Transformation Project.
Internal dispute resolution: expressions of interest for ASFA working group
ASFA is seeking expressions of interest for participation in a working group to consider issues in relation to internal dispute resolution (IDR).
As reported in ASFA Action issue 768, ASIC recently published RG 271 Internal Dispute Resolution – a set of substantially revised IDR standards that will apply to financial firms, including superannuation fund trustees, for complaints received from 5 October 2021.
The new standards will require major changes to financial firms’ IDR processes, including significantly reduced maximum response timeframes for many types of complaints. In particular, unless limited exceptions apply, an IDR response must be provided:
- for superannuation complaints other than complaints about death benefit distributions – no later than 45 calendar days after receiving the complaint
- for complaints about superannuation death benefit distributions – no later than 90 calendar days after the expiry of the 28 calendar day period for objecting to a proposed death benefit distribution.
Other important changes include an expanded concept of what constitutes a ‘complaint’, and prescription around aspects of the IDR function.
While financial firms have just over a year to prepare for the commencement of RG 271, considerable work will be required to implement the requirements, given the magnitude of the changes. We understand that both ASIC and AFCA are already beginning to consider their approach to the limited exceptions outlined in RG 271, that allow a financial firm to exceed the maximum IDR response time where a complaint is “particularly complex” and/or circumstances beyond the firm’s control are causing complaint management delays.
In addition, ASIC has indicated that it will shortly undertake further consultation on proposed IDR reporting measures which will require financial firms’ report prescribed IDR data, with ASIC then publishing data at both an aggregate and financial firm level. These were carved out of RG 271 following feedback—including from ASFA—that the measures required further consideration.
ASFA will be convening a working group to provide input for ASFA’s response to ASIC’s consultation on IDR reporting, and to consider implementation issues arising in relation to RG 271. Depending on the timing of the ASIC consultation, we anticipate that the working group will meet for the first time in October.
If you—or a member of your organisation—are interested in joining ASFA’s working group, please contact Julia Stannard by close of business Friday 11 September.
Superannuation bills update
Parliament debated several superannuation-related bills last week, in the first half of its last sitting fortnight before the Budget on 6 October.
Extending choice of fund
Amendments to extend choice of fund have now completed their passage through Parliament.
The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 was passed with an amendment to change the date of effect, so that choice will now apply to new workplace determinations and enterprise agreements made on or after 1 January 2021 (rather than 1 July 2020). A further amendment will require APRA to conduct a review of the new extended choice arrangements within 30 months of their commencement, to identify any unintended consequences. A number of other amendments proposed by the Opposition and cross-bench were not accepted. (See ASFA Action issues 760 and 729 for background on this Bill.)
Bring forward arrangements
The Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 has been passed by the House of Representatives and awaits consideration by the Senate.
This Bill contains an amendment extending the bring forward arrangements for non-concessional contributions to individuals under age 67, as announced in the April 2019 Budget. The amendment is intended to commence on the first 1 January, 1 April, 1 July or 1 October after the amending Act receives Royal Assent and, once law, the amendment will apply to non-concessional contributions made on or after 1 July 2020.
The Opposition sought to amend the Bill to include a statement that the House of Representatives calls on the Government to “ensure that all Australians can enjoy a dignified retirement”, including by committing to the scheduled and legislated increases to the Superannuation Guarantee and to adequate funding for the Aged Pension. Earlier today, this amendment was rejected and the Bill was passed by the House of Representatives.
The One Nation party has circulated a number of amendments that it intends to move to this Bill in the Senate. At a high level, these would:
- progressively increase the concessional contributions cap by $10,000 each year from ages 67-71
- allow individuals who have utilised the Coronavirus early release initiative to make ‘recontributions’ that do not count toward their non-concessional contributions cap
- provide that an individual will not have excess concessional contributions as a result of their employer making the contribution required of them under an ‘approved workplace superannuation scheme’. This would only apply if the individual’s salary or wages from the employer is under $300,000 in a financial year and the required employer contribution is no more than 16 per cent of that salary or wages.
The Bill is now awaiting debate in the Senate.
(See ASFA Action issues 760 and 755 for background in relation to this Bill.)
Related amendments to increase the age at which the work test starts to apply to voluntary contributions from 65 to 67, and increase the cut-off age for spouse contributions from age 70 to 75, were recently implemented via the Superannuation Legislation Amendment (2020 Measures No. 1) Regulations 2020 (see ASFA Action issue 757).
Superannuation Consumer Centre
The Treasury Laws Amendment (2020 Measures No.2) Bill 2020 has now completed its passage through Parliament, after the Senate resolved not to insist on amendments that were not accepted by the House of Representatives. Of relevance to superannuation, this omnibus Bill includes a provision making Superannuation Consumers’ Centre Ltd a deductible gift recipient. (See ASFA Action issues 760 and 755 for background on this Bill.)
ASIC corporate plan
ASIC has released its corporate plan for 2020-24, setting out its actions to address the impact of the COVID-19 pandemic as well as longer term threats and harms in its regulatory environment.
The plan indicates that ASIC’s work to address the COVID-19 pandemic is guided by five strategic priorities:
- protecting consumers from harm at a time of heightened vulnerability
- maintaining financial system resilience and stability
- supporting Australian businesses to respond to the effects of the pandemic
- continuing to identify, disrupt and take enforcement action against the most harmful conduct
- continuing to build its organisational capacity in challenging times.
The plan also reiterates ASIC’s commitment to other longer-term focus areas, including delivering as a conduct regulator for superannuation.
COVID-19 Coronavirus: early release of super – APRA data
APRA has made its eighteenth weekly publication of industry-level data from its early release initiative data collection.
The data covers applications made from inception of the early release initiative on 20 April through to 23 August.
The data shows that from 20 April to 23 August:
- payments totalling $32.2 billion had been made, with an average payment of $7,683
- 3.1 million ‘initial’ applications had been received, with an average application amount of $7,402
- 1.2 million ‘repeat’ applications had been received, with an average application amount of $8,452
- funds were taking an average of 3.3 business days to pay an application, with 95 per cent of applications paid within five business days.
An ‘initial’ application is the first application made in respect of a member account whether this occurred in the 2019-20 financial year application period or the 2020-21 financial year application period. A ‘repeat application’ is an application for a member account that previously submitted an initial application – all ‘repeat’ applications therefore relate to the 2020-21 financial year application period.
APRA has also published the seventeenth tranche of fund-level statistics from its early release data collection, revealing the number and value of the payments processed by each fund, as well as the time taken to make payments.
COVID-19 Coronavirus: APRA Insight
The latest issue of APRA’s Insight newsletter has a number of feature articles with a COVID-19 theme, including:
- operational resilience, including in the context of COVID-19 providing a ‘real world’ test –COVID-19 is emphasising to APRA and its regulated entities important lessons about the maintenance of sufficient operational resilience, the factors that can undermine that resilience, and the need to consider a variety of plausible shocks. APRA is now applying these lessons to improve its supervision practices to continue to safeguard Australia’s financial system.
- managing superannuation fund liquidity in the midst of COVID-19 – while APRA considers that overall trustees have managed liquidity well during the pandemic, there is room for improvement. In particular, APRA has stressed that trustees will need to place particular emphasis on:
- reviewing their liquidity management plan and liquidity stress testing practices to take into account new information, and to ensure the underlying assumptions remain appropriate, particularly if the maintenance of the strategic asset allocations in their investment strategies proves challenging
- ensuring their liquidity management plan includes clearly defined ‘liquidity events’ such as investment option switching (member-generated events) or capital drawdowns arising from specific investments (investment/asset-specific events), and that these are regularly reviewed to take into account changes in the environment or actual experience
- ensuring their liquidity stress testing considers the likelihood that the underlying drivers of liquidity risk such as significant market turndowns, member switching, and increased redemption requests may occur simultaneously under certain extreme scenarios. Assumptions should be regularly updated to reflect the fact that certain assets become less liquid under stressed market conditions
- embedding the results of liquidity stress testing into the formulation and review of investment strategies, taking into account recent and future liquidity requirements and the impact on actual versus strategic asset allocation
- where liquidity stress testing is outsourced to a third party (such as an asset consultant), ensuring the necessary arrangements are in place to enable stress testing to be adequately updated to reflect rapidly changing environments, and the outcomes from stress testing are made available in a timely manner.
The newsletter also outlines how APRA has adapted to remote supervision during the pandemic.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
