Despite the continuing impacts of COVID-19, regulatory developments over the last month have been split fairly evenly between pandemic response and business as usual. As well as an extension to the application period for the Coronavirus early release of super, we have seen important developments in relation to internal dispute resolution and fee and cost disclosure, amongst a host of regulator releases.
Coronavirus early release of super
As part of its Economic and Fiscal Update, in late July the Government announced an extension of the 2020-21 application period for the Coronavirus early release of superannuation initiative.
Under the announcement, eligible Australian and New Zealand citizens and permanent residents will now be able to lodge applications for the tax-free release of up to $10,000 of their superannuation until 31 December 2020, rather than 24 September as currently legislated. (Eligible Australian and New Zealand citizens and permanent residents, as well as eligible temporary residents, were also able to apply for the release of up to $10,000 before 1 July 2020.)
APRA has continued to publish weekly statistics from its early release initiative data collection, at both an industry-wide and fund level. As at the date of this rules and regs, the latest data—published on 27 July and covering applications from 20 April to 19 July—showed that payments totalling $28.0 billion had been made.
APRA has also updated its data collection that seeks to assess the progress and impact of the Government’s temporary early release of superannuation initiative (ERI). Changes to reporting form SRF 920.0 are intended to enable assessment of the magnitude of repeat applications and the effect of ERI payments on account closures. The first updated collection, for the week ending 5 July, was due for lodgment by 8 July.
Government’s Economic and Fiscal Update – superannuation announcements
In addition to the extension of the application period for the early release of super initiative (see above), the Government’s Economic and Fiscal Update also included a number of other announcements relevant to superannuation.
- Facilitating the closure of eligible rollover funds (ERFs): the Government will amend the Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020, which is currently before the Senate, to:
- defer by 12 months the start date of the measure that prevents superannuation funds transferring new amounts to ERFs (initially, this measure was to apply from the later of seven days after Royal Assent of the legislation or 1 May 2020)
- defer the date by which ERFs are required to transfer accounts below $6,000 to the ATO from 30 June 2020 to 30 June 2021
- defer the date by which ERFs are required to transfer remaining accounts to the ATO from 30 June 2021 to 31 January 2022
- allow all superannuation funds to voluntarily transfer amounts to the ATO where the trustee believes it is in the best interests of that member – for example, amounts that would otherwise have been transferred to an ERF. (Under a previously circulated amendment to the Bill that would have implemented this measure, the proposed start date was—as for the first measure noted above—the later of seven days after Royal Assent of the legislation or 1 May 2020. It is possible that commencement of this item will therefore be aligned with the new date for the first measure.)
- Revised start dates for tax and superannuation measures: the commencement dates for a number of additional tax and superannuation measures will also be deferred:
- the Retirement Income Covenantwill be deferred from 1 July 2020 to 1 July 2022 (the Government had previously flagged a deferral but had not confirmed the new commencement date)
- the proposed measure increasing the maximum number of allowable members in self-managed superannuation funds and small APRA fundsfrom four to six will now apply from the date of Royal Assent of the enabling legislation (rather than 1 July 2019)
- the proposed measure removing the capital gains discount at the trust levelfor Managed Investment Trusts (MITs) and Attribution MITs will now apply to the income year commencing on or after three months after the date of Royal Assent of the enabling legislation (rather than from 1 July 2020)
- the proposed measure to streamline the calculation of funds’ exempt current pension incomewill now apply from 1 July 2020 (rather than 1 July 2021)
- the proposed measure to allow the ATO to pay lost and unclaimed superannuation amounts directly to New Zealand KiwiSaver accounts—which was announced in the 2015-16 Budget but never progressed—will now commence six months after the date of Royal Assent of the enabling legislation (rather than 1 July 2016).
Parliamentary sitting fortnight cancelled
The Government has cancelled the Parliamentary sitting days scheduled for 4-6 and 10-13 August due to the pandemic. Parliament will now resume on 24 August.
The regulators’ response
As well as updating its specific data collection about the early release initiative (see above), APRA has launched a new ‘pandemic data collection’ (PDC), designed to:
- provide APRA with enhanced data surrounding the early release of superannuation, enabling analysis of impacted demographics
- provide APRA and ASIC with monthly data on complaints, member accounts with insurance that have been cancelled, insurance claim activity and intra-fund advice provided
- provide APRA with quarterly data on investment options, foreign currency exposure and hedging, and member switching
- allow APRA to understand the impact of the COVID-19 pandemic on the superannuation industry and provide reporting to the Government and other agencies.
The initial monthly and quarterly lodgments under the PDC were due on 31 July. APRA has published a series of frequently asked questions (FAQs) about the PDC.
ASIC has updated its FAQ 1C, which addresses its expectations of trustees in communicating to their members about the impact of COVID-19 on their insurance inside superannuation.
Despite the cancellation of some Parliamentary sittings, the return to business as usual continues, with a number of regulatory releases during the month – including significant developments around internal dispute resolution and fee and cost disclosure.
Internal dispute resolution: new regulatory guide
ASIC has published substantially revised standards for internal dispute resolution (IDR) for financial firms, including superannuation trustees. New regulatory guide RG 271 Internal Dispute Resolution will apply to complaints made from 5 October 2021.
RG 271 introduces reduced timeframes for responding to complaints. As anticipated, there are significant changes to the timeframe for providing an IDR response for a ‘superannuation trustee complaint’. The following maximum timeframes will apply:
- for superannuation trustee complaints other than complaints about death benefit distributions – an IDR response must be provided no later than 45 calendar days after receiving the complaint
- for complaints about superannuation death benefit distributions – an IDR response must be provided no later than 90 calendar days after the expiry of the 28 calendar day period for objecting to a proposed death benefit distribution.
Importantly, RG 271 provides a conditional exemption from the above timeframes where there has been no reasonable opportunity to provide the IDR response because resolution of the individual complaint is particularly complex, and/or circumstances beyond the trustee’s control are causing complaint management delays.
In addition to stipulating new maximum timeframes for IDR responses, RG 271 also sets out what information financial firms must include in written IDR responses to allow consumers to decide whether to escalate their complaint.
Earlier in July, ASIC registered the ASIC Corporations, Superannuation and Credit (Amendment) Instrument 2020/99. This amended the ASIC Corporations and Credit (Internal Dispute Resolution—Transitional) Instrument 2019/965, to ensure the existing IDR standards—set out in Regulatory Guide RG 165 Licensing: Internal and external dispute resolution and section 101 of the Superannuation Industry (Supervision) Act 1993—will continue in effect until 5 October 2021. A further legislative instrument is expected to be issued to clarify the enforceable IDR standards and requirements.
Fee and cost disclosure: ASIC amending instrument
ASIC has registered the ASIC Corporations (Amendment and Repeal) Instrument 2020/579. This clarifies the date from which its revised fee and cost disclosure requirements for superannuation funds and managed investment products apply to Product Disclosure Statements (PDSs) and periodic statements and makes a number of technical amendments to the disclosure requirements.
Instrument 2020/579 makes minor amendments to ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070 and some related instruments to clarify and confirm the intended operation of aspects of the fee and cost disclosure regime and give effect to ASIC’s intended policy positions. Important aspects of Instrument 2020/579 include:
- amendments to the transition arrangements for PDSs, so that PDSs given on or after 30 September 2022 must comply but issuers can elect to apply the new requirements from 30 September 2020
- amendments to the election arrangements applying to PDSs and periodic statements, including to clarify that an election cannot be withdrawn
- amendments to definitions and references to several types of costs and amends the example of annual fees and costs
- correction of a cross reference regarding consumer facing definitions that must appear in a superannuation PDS or must be incorporated by reference and a minor amendment to the consumer advisory warning
- an exemption—subject to conditions—from the disclosure rules about significant events and changes where the change or event that would otherwise require notification results directly from a product issuer’s updates to comply with Instrument 2020/579.
ASIC technical amendments: PDS in use notices, repeal of spent instruments, IDPS
As well as amending the fee and cost disclosure requirements (see above), the ASIC Corporations (Amendment and Repeal) Instrument 2020/579 makes a number of technical amendments relevant to superannuation. The Instrument:
- amends an outdated reference in ASIC Class Order [CO 12/415], which provides flexibility in how PDS ‘in-use’ notice information is provided to ASIC for employer-sponsored superannuation products
- repeals ASIC Class Order [CO 13/1420], which granted interim relief to superannuation trustees from the requirement to separately report the amount of low income superannuation contributions in a periodic statement, for reporting periods ending on or before 30 June 2015
- repeals ASIC Corporations (Urgent Superannuation Advice) Instrument 2017/530. This granted interim relief to financial advisers from the timing requirements relating to the giving of Statements of Advice in the period leading up to 1 July 2017 (the commencement date for most of the superannuation reforms announced in the Government’s May 2016 Budget).
MySuper heatmaps updated
APRA’s analysis of the latest data, summarised in a new Insights paper, shows products with 6.1 million MySuper members (42 per cent) have lower total fees, resulting in estimated aggregate savings for members of $110 million a year. However, APRA also found that fund administration fees have largely remained static or risen slightly, while the majority of funds that underperformed on fees and costs in the December 2019 Heatmap continue to have relatively high fees.
APRA Deputy Chair Helen Rowell said while the updated data is a promising start, both APRA and fund trustees must do more to optimise member outcomes. Mrs Rowell said APRA would continue to take a more intensive supervision approach with the trustees of underperforming funds.
APRA acknowledges that recent financial market volatility will impact investment performance and lead to changes in the outcomes for MySuper members. APRA will consider this when it publishes a complete refresh of the heatmap later this year. APRA also continues to advance plans to expand the heatmap to cover insurance, and also choice products.
APRA reminder on upcoming legislative obligations
APRA has written to registrable superannuation entity licensees to remind them of two new key obligations that are designed to prompt robust and in-depth consideration of the outcomes being delivered to members – the Business Performance Review (BPR) and the outcomes assessment.
The letter notes that:
- the first BPR is to be completed by 31 December 2020 and requires each RSE licensee to assess its performance in achieving its strategic objectives across its business operations, taking into account the results of the legislated outcomes assessment, and to use the BPR as the basis for taking action to improve performance
- the first annual outcomes assessment is to be completed by the end of February 2021, with the results published within 28 days.