Spring has kicked off with the Putting Members’ Interests First bill passing the Parliament and a new round of consultation from Treasury and the regulators, on diverse issues including Protecting Your Super, member outcomes, design and distribution obligations and ASIC’s powers.
Putting Members’ Interests First
The Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 (PMIF Bill), which contains provisions making insurance opt-in for members under 25 or with account balances under $6,000, has passed both Houses after being amended in the Senate.
The two significant amendments made by the Senate and agreed to by the House of Representatives were to:
- defer the start date from 1 October 2019 to 1 April 2020, with the associated stocktake and member notification dates altered from 1 July and 1 August 2019 to 1 November and 1 December 2019 respectively
- introduce a dangerous occupation exemption to the list of exceptions where the trustee is able to provide insurance on an opt-out (default) basis.
Protecting Your Superannuation
Treasury has undertaken a brief consultation on draft legislation and regulations proposing amendments to aspects of the Protecting Your Superannuation (PYS) reforms, as well as a number of miscellaneous superannuation amendments.
The draft Treasury Laws Amendment (Measures for a later sitting) Bill 2019: miscellaneous amendments (draft Miscellaneous Amendments Bill) addresses an issue with the application of the fee cap on low superannuation balances. The Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 (PYS Act) amended the Superannuation Industry (Supervision) Act 1993 (SIS Act) to apply a cap on the fees that could be charged by a superannuation trustee when the balance of a product held by a member was less than $6,000 at the end of the year. The PYS Act did not provide for a fee cap where the member has a balance of less than $6,000 but ceases holding the product part way through the fund’s income year.
In a related context, the draft Miscellaneous Amendments Bill also includes amendments that:
- provide that an account is not an ‘inactive low balance account’ if the member has elected to maintain insurance on that account
- modify two of the exceptions to the definition of ‘inactive low balance account’ to ensure they give effect to the initial policy intent
- rectify incorrect cross-references to the unclaimed superannuation legislation.
Miscellaneous super amendments
As well as refinements to the PYS reforms and unclaimed superannuation rules (see above), the draft Miscellaneous Amendments Bill also includes a number of other superannuation-related amendments. These include:
- linking the commencement of employer reporting rules about salary sacrificed contributions to measures currently before Parliament in the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No 1) Bill 2019, that will prevent employers from taking those contributions into account to reduce their superannuation guarantee obligations
- ensuring the superannuation downsizer provisions operate as intended
- removing current requirements that superannuation providers report to the ATO when certain changes occur in relation to unclaimed superannuation money, lost member accounts and low balance inactive accounts amounts
- clarifying when a person has been ‘involved’ in a contravention of a provision.
Treasury has also issued draft Treasury Laws Amendment (Measures for a Later Sitting) Regulations 2019. Of relevance to superannuation, these repeal regulations made under a transitional—and now repealed—provision in the superannuation law.
Submissions closed on 27 September.
Member outcomes and business performance review: final APRA requirements and new consultation
APRA has finalised prudential requirements for how registrable superannuation entity (RSE) licensees assess the outcomes they are delivering to their members and has commenced a consultation on additional guidance to support the new requirements.
Earlier this year, APRA undertook consultation to clarify how its prudential standard SPS 515 Strategic Planning and Member Outcomes (SPS 515) would interact with the outcomes assessment legislated by the Government in the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Act 2019.
APRA has now published the final version of SPS 515, along with its response to the submissions received as part of that consultation process, and a finalised prudential practice guide SPG 515 Strategic and Business Planning.
APRA has also released a draft prudential practice guide SPG 516 Business Performance Review for consultation, with the final version expected to be published in December.
Deputy Chair Helen Rowell has indicated that SPS 515 will require all RSE licensees to perform an annual Business Performance Review, designed to complement the requirements of the legislated outcomes assessment. Where the legislated assessment requires licensees to assess member outcomes at a product level at a point in time, APRA’s Business Performance Review also requires licensees to assess outcomes across a broader range of metrics for different member cohorts. Further, licensees must consider whether they will continue to deliver quality outcomes for all their members into the future and take action if they identify areas needing improvement. SPS 515 will come into force from 1 January 2020.
With APRA also strongly focused on weeding out underperforming funds, Mrs Rowell confirmed APRA intended to start publishing additional information on superannuation performance by the end of the year. Starting with MySuper products, APRA plans to publish assessments of performance based on a range of measures and benchmarks in four key areas: investment returns, fees and charges, sustainability and (in due course) insurance. APRA is developing a heat map or traffic light approach that will assist stakeholders to form an overall view of the performance of each MySuper product against the measures and benchmarks used. This approach will be expanded to include choice products over time, as additional, more reliable data becomes available.
Strengthening ASIC’s enforcement and supervision powers: consultation
Treasury is consulting on amendments to strengthen ASIC’s enforcement and supervision powers, in line with the recommendations of the ASIC Enforcement Review Taskforce and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The Taskforce was established in October 2016 to fulfil the Government’s commitment to review the adequacy of ASIC’s enforcement regime in response to the Murray Financial System Inquiry. The Taskforce conducted a number of consultations during 2017 and made 50 recommendations to strengthen ASIC’s powers and penalty regime. In April 2018 the Government published the Taskforce’s report and its response, agreeing in principle to all 50 recommendations. A number of the recommended reforms have already been implemented, however some were deferred for consideration alongside the final report of the Royal Commission.
The Commission ultimately endorsed the outstanding Taskforce recommendations, and Treasury has now released a package of exposure draft legislation addressing their implementation.
The draft legislation proposes amendments to:
- strengthen ASIC’s licensing powers by replacing the Australian financial services (AFS) licence requirement that a person be of ‘good fame and character’ with an on-going requirement that they be a ‘fit and proper person’
- align the penalties for false and misleading statements in AFS and Australian Credit Licence applications
- extend ASIC’s powers so it may ban a person from performing functions in a financial services or credit business, and expand the grounds on which ASIC can issue banning orders
- harmonise ASIC’s search warrant powers across different Acts and brings them into line with the search warrant powers in the Crimes Act
- allow interception agencies to provide lawfully intercepted information to ASIC for serious offences that ASIC can investigate or prosecute.
Submissions close on 9 October.
Design and distribution obligations: consultation on regulations
Treasury has released a draft of regulations to support the recently introduced ‘design and distribution’ obligations on financial services providers.
The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act introduced new requirements on financial services providers, intended to ensure that financial products are appropriately targeted and sold to consumers.
Treasury consulted on an earlier draft of regulations to support the reforms late last year and has now released an updated draft which reflects amendments made as the legislation passed through Parliament.
The draft regulations extend the design and distribution obligations to apply to some additional products and persons. Importantly for superannuation, the draft regulations also exclude from the obligations interests in eligible rollover funds and defined benefit interests.
Treasury is seeking submissions by 11 October.