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In a move to address industry concerns about the proposed timeline to implement insurance measures in thePutting Members’ Interests FirstBill, the Senate Economics Legislation Committee has recommended a new commencement date of December 1, 2019.
The Committee – which released its report on the Bill yesterday - acknowledged that there was widespread industry concern that original implementation date of October 1 would be a challenge to achieve and recommended that the government changes the date of commencement to 1 December 2019. Subject to the consideration of this recommendation, the Committee recommends that the Bill be passed.
While AIST welcomes the Committee’s recognition that more time is required to implement the insurance measures, we support the dissenting recommendation from the Labor Senators for an even longer implementation timeline, with a deadline of July 1, next year.
The follow table provides an overview and summary of the report:
Submissions and witnesses were all broadly supportive of the policy objective - protect low balance accounts from undue erosion owing to excessive fees and inappropriate insurance.
Whether measures meet this objective
The differences were the extent to which the measures effectively meet this objective.
1 July 2019 difficult to meet
Number of industry representatives seeing 1 July 2019 as a challenge to meet.
This was the most frequently raised concern.
Unintended impact on cohorts
Number of industry representatives urged caution re: impact on various cohorts.
The committee understands these concerns but the Bill does not bar members from opting-in.
The Committee acknowledged that super had changed and people don’t stay in the same job.
Opt out for low balance active accounts < $6K
Number of industry reps expressed concern re opt out default insurance for active accounts < $6,000.
Impact on insurance premiums
The committee recognises there may be changes in the overall risk profile of insured members owing to these changes but stresses that any increases in premiums only demonstrates substantial cross-subsidies.
Dissenting recommendations from the Labor senators are as follows:
The Australian Prudential Regulation Authority (APRA) has released new rules for Australia’s banking, insurance and super fund executives that include restrictions on variable remuneration.
APRA is seeking feedback on its draft new prudential standard CPS 511Remuneration aimed at clarifying and strengthening remuneration requirements in APRA-regulated entities.
A three-month consultation will close on 22 October. APRA intends to release the final prudential standard by the end of 2019, with the intention of having the new standard coming into effect in 2021.
APRA has developed the new prudential standard in response to recommendations from the Hayne Royal Commission. The Commission found that existing remuneration arrangements had been a factor in driving poor customer outcomes.
The proposed changes include setting no more than 50 per cent of variable pay on financial measures and guidelines for minimum deferral periods for bonuses of up to seven years, clawbacks on bonuses for up to four years and requiring boards, for the first time to sign off on the remuneration of all employees.
The prudential standard is aimed at better aligning remuneration frameworks with the long-term interests of entities and their stakeholders, including customers.
AIST will be making a submission and welcomes member feedback which should be directed to email@example.com
In a response to the findings of the Financial Services Royal Commission, the Australian Securities and Investments Commission (ASIC) has proposed a ban on unsolicited telephone sales of direct life insurance and consumer credit insurance.
The move is part of a wider recommendation to come out of the royal commission to prohibit the hawking of insurance and superannuation products and introduce a legislated definition of ‘unsolicited’.
In a previous report on consumers’ experience with the sale of direct life insurance, ASIC found that when it came to purchasing direct life insurance via outbound calls, consumers were:
ASIC commissioner Sean Hughes said the regulator would step in to stop practices that led to poor consumer outcomes and destroyed trust in the system.
ASIC is seeking feedback on its consultation paper by 29 August, 2019.
A finalised instrument is expected to be released in March 2020.
AIST has reiterated the importance of lifting the Super Guarantee to 12 per cent in the wake of calls from coalition backbenchers to scrap the SG rise.
In a media release earlier this week, AIST warned that stalling the Super Guarantee increase at 9.5 per cent would entrench the ongoing, unacceptable chasm in retirement outcomes between men and women.
AIST argued that women currently aged between 35 and 60 will retire with up to 30 per cent less super than their male counterparts, with an estimated 40 per cent of single women retiring in poverty.
AIST head of advocacy, Ailsa Goodwin, said increasing the Superannuation Guarantee to 12 per cent as originally intended would make the single greatest contribution to improving women’s retirement balances and was necessary to address the unique challenges that women face when it comes to paid work.
“Leaving super at 9.5 per cent will consign women to financial hardship in retirement,” Ms Goodwin said. “Women live longer than men and are increasingly approaching retirement without the safety net of home ownership relied upon by previous generations.”
Ms Goodwin said unlike most low income women, many high income earners – including politicians - already received super contributions of 12 per cent or higher.
“What is good enough for them, should be good enough for the women of Australia,” Ms Goodwin said, adding that high income earners also tended to have greater opportunities to work longer before they retired.
25 July 2019