- AIST Policy News - 14 September 2017
AIST Policy News
Government moves on independence, outcomes test, choice of fund and dispute resolution
The Federal Government has today introduced four Bills into Parliament concerning superannuation matters, including a Bill to mandate one third of independent directors on super fund boards.
The Bill – Superannuation Laws Amendment (Strengthening Trustees Arrangements) 2017– was introduced into the Senate this morning (as opposed to the more typical route via the House of Representatives) and immediately referred to a Senate Committee which has until 23 October 2017 to report back to Parliament.
In relation to the vitally important issues of equal representation and board composition, the Bill is similar to the Government’s previous 2015 Bill on super fund governance that was deferred by the Senate pending the outcome of Fraser Review.
Key matters in the Bill include:
- Trustee boards must have at least one third independent directors;
- Boards must have an independent chair;
- Equal representation removed from SIS Act;
- Definition of independence; and
- APRA will have the power to determine whether or not a person is independent.
As with the Government’s previous Bill, AIST does not support the boards of profit-to-member funds being forced to appoint independent directors, particularly as all representative directors are non-executive directors who meet the ASX definition of independence. We strongly support the equal representation model with funds having the flexibility to appoint up to one third of non-representative directors where whole-of-board skill gaps are identified.
AIST will continue to argue strongly against this Bill and we have upcoming meetings with various members of the Senate, including the Nick Xenophon Team.
The second Bill – Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation no 1) Bill 2017 – was also introduced to the Senate today. This Bill (which has also been referred to a Senate Committee with a report due 23 October 2017) relates to strengthening APRA’s powers and the MySuper outcomes test.
Key matters in this Bill include:
- MySuper outcomes test;
- Director penalties;
- APRA’s directions power;
- Portfolio holdings disclosure;
- Annual Member Meetings; and
- Reporting Standards – including standards on fund expenditure.
Other than the inclusion of portfolio holdings disclosure, the legislation has not significantly changed from the previous consultation draft. AIST will continue to raise our concerns on various aspects of this Bill through the parliamentary process.
Move to extend Choice of fund
The third Bill – Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation no 2) Bill 2017 – was introduced to House of Representatives and also subsequently referred to a Senate Committee with a report due by 23 October 2017. This Bill relates to removing salary sacrifice loopholes (which AIST supports) and extending Choice of fund to all individuals (which AIST supports only in cases where those individuals will be clearly better off as a result).
Establishing the Australian Financial Complaints Authority
The fourth Bill – Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 – was introduced into the Senate and then subsequently referred to a Senate Committee for report by 17 October 2017. The Bill seeks to establish a new external dispute resolution framework and to enhance internal dispute resolution within the financial system.
Key matters in the Bill include:
- Establishment of the Australian Financial Complaints Authority (AFCA) to replace the Superannuation Complaints Tribunal (SCT), the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO). AFCA will consider disputes about products and services provided by Financial Firms, which includes regulated superannuation funds;
- A number of statutory powers to assist AFCA in resolving superannuation complaints; and
- Establishment of an enhanced internal dispute resolution framework.
Members seeking further information on any of the four Bills can contact AIST senior policy manager David Haynes at firstname.lastname@example.org
Nick Xenophon Team introduces super package aimed at reducing employer non-compliance
Related to the four Bills introduced today, MP Rebekha Sharkie has also introduced a Private Member’s Bill aimed at giving employees more power to pursue unpaid super.
Measures contained in the Bill – Fair Work Amendment (Recovering Unpaid Superannuation) Bill 2017 – introduced to the House of Representatives on Monday – included:
- Including superannuation contributions within the National Employment Standards. This would give the Fair Work Ombudsman the authority to pursue recovery of unpaid employer superannuation contributions. Employees would also have a direct legal avenue to recover unpaid superannuation;
- Enabling employees to more effectively track if and when superannuation contributions are made to them by their employers, by requiring employers to provide notice of when contributions are made (or not paid) for each pay period;
- Removing the loophole which currently allows employers to potentially claim employee contributions made via salary-sacrifice as employer contributions;
- Removing the exemption that currently exists for employers that allows them to not to make superannuation contributions to employees who are paid less than $450 in wages in a calendar month;
- Requiring the Commissioner for Taxation to conduct a review of employers’ compliance with their superannuation payment obligations;
- Creating a duty for trustees of superannuation entities to take reasonable steps to notify their members (within 28 days and by any means) when it could reasonably have expected their member to have received a contribution from an employer, but they did not;
- Expanding the information that superannuation providers are required to provide to the Commissioner for Taxation in their annual Member Information Statements to better inform Government policy; and
- Removing restrictions for employees on their choice of Super Fund.
AIST supports the majority of measures contained in the Bill, with the exception of removing restrictions for employees on their choice of super fund. AIST argues Enterprise Bargaining Agreements (EBAs) delivering additional superannuation benefits to members should be exempt from this measure.
Due to it being introduced as a Private Member’s Bill, we do not expect to see the Bill progress to voting stage. However AIST will be meeting with the Nick Xenophon Team over coming weeks to discuss the measures and the other Bills concerning superannuation which are currently before Parliament.
In a media release issued this week, AIST welcomed the proposed removal of the $450 monthly income threshold alongside with important changes to payslip reporting that have long been called for by AIST. The proposed measures would require employers to provide notice of when super contributions are made (or not made) as opposed to simply reporting entitlements accrued.
Insurance draft Code due for release
The Insurance in Superannuation Working Group (ISWG) will soon be releasing a draft Code of Practice for super fund trustees for consultation.
The Draft Code seeks to address the following:
- Account balance erosion due to insurance premiums;
- Claims handling timeframes and improvements to the member experience;
- Member communication and engagement on insurance in super;
- Data management; and
- Premium adjustment mechanisms between super funds and insurers.
AIST members will be alerted as soon as the draft Code is available and AIST will be conducting a comprehensive consultation and feedback process with members around the country through a series of roadshows in October. Details will be shared shortly.
Members can view more information on the work of the Insurance in Superannuation Working Group here or contact AIST senior policy manager David Haynes for more information at email@example.com
ASIC to contact trustees on insurance arrangements
The Australian Securities Investments Commission (ASIC) has flagged that it will be issuing notices to trustees asking for further information on insurance arrangements in an industry meeting this week.
ASIC will be contacting 10 trustees next week in relation to the use of “smoking” and “blue-collar” statuses as defaults, as well as rebates paid to funds by insurers.
The industry meeting also discussed two new projects that are currently underway that are looking at the role of insurance within superannuation.
The projects are examining the role that employers play in their interactions with members and product providers, as well as disclosure, complaints handling, culture and conduct in the provision of insurance.
The projects will culminate in a high level report around employers, and guidance in relation to insurance.
ASIC issues legislative instrument for RG97
The Australian Securities and Investment Commissions (ASIC) has issued a legislative instrument for RG97 –Disclosing fees and costs in PDSs and period statements.
The amendment to Class Order 14/1252 deals with some of the more controversial aspects of the fee and cost disclosure regime, notably how borrowing, interposed vehicles, property costs and bid-ask spreads are treated in RG 97.
AIST continues to engage with ASIC on these key issues and will keep members informed about any new developments.
The RG97 industry-wide working group is expected to issue updated guidance to RG 97 in the next few days which we will circulate to members.
Further detail is available in the explanatory memorandum. Members seeking further information or wishing to provide feedback can contact AIST senior policy manager David Haynes at firstname.lastname@example.org
AIST will also be conducting an RG97 roadshow during late October:
- Melbourne – Monday 16th October
- Brisbane – Tuesday 17th October
- Sydney – Friday 20th October
Further details – including how to register – will be distributed to members shortly.
Strengthening operational governance for trustees: APRA submission
AIST welcomes the proposal to reduce the number of loopholes that employers can use to shortchange employees that salary sacrifice.
On 11 August 2017 the Australian Prudential Regulation Authority (APRA) released a letter to trustees outlining their intention to consult on proposals to strengthening operational governance of trustees.
In a submission to APRA, AIST supported the proposed member outcomes test that applies to all superannuation products provided that the role of net returns is not diluted. AIST’s submission also states the existing regulatory framework provides APRA with sufficient power to address any governance weaknesses within funds.
Members seeking further information can contact AIST senior policy manager David Haynes at email@example.com
Cross-agency group to assist in development of post-retirement products
A new cross-agency group has been formed to assist in the development of retirement income stream products.
The cross-agency process involves the Australian Taxation Office (ATO), Australian Securities and Investments Commission (ASIC), Australian Prudential Regulatory Authority (APRA) and the Department of Social Security (DSS) and is available to funds, insurers and other product providers to assist with getting their retirement income products to market. The ATO and DSS are also available for product rulings, as well as social security guidance.
The intention of the cross-agency process is to:
- Facilitate engagement by providing a single entry point to initiate contact with the relevant government agencies;
- Allow product providers to test concepts, seek information and high-level guidance in response to the topics or issues they have raised and their view on how the product meets the requirements of the relevant legislation; and
- Complement existing processes within the individual agencies.
The group aims to help providers with general consideration of products and assist with providing certainty in relation to tax a product rules. The process is voluntary.
You can see how the cross-agency group can assist your fund here.