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APRA will be releasing a heatmap on the performance of MySuper products, with the regulator to notify ‘laggards’ ahead of the first report due Nov/Dec this year.
The heatmap will present data already published by APRA but in a different form. The intended audience for this report is trustees and not consumers but the information is expected to be made public. The heatmap will be a comparison of performance across three key areas:
Each element will have multiple measures used, for example, investment performance will include net returns and risk adjusted returns (compared to a reference portfolio). APRA does not intend to publish an overall product level rating. This is consistent with APRA’s intended use of the heatmap – that trustees use it as a starting point to undertake deeper analysis, consistent with APRA’s requirements set out in SPS 515.
APRA has consulted with external experts on its methodology to ensure it is robust. APRA has said that trustees identified as “laggards” will be contacted prior to the release of the report.
APRA is planning to extend the heatmap to ‘Choice’ products but no date has been provided. In addition, a further iteration for MySuper is intended to include insurance measures. APRA has indicated that the initial focus is quantitative measures but it may look at qualitative measures in the future.
AIST has welcomed the broad scope of the Retirement Income Review, noting that it will be important for the Review to collect data on retirement outcomes for women, and vulnerable and low income workers so that future policy approaches address the needs of all Australians.
While the legislated timeline to lift the Super Guarantee to 12 per cent in 2025 will significantly improve the adequacy of retirement incomes, AIST recognises that some policy changes are needed to ensure our retirement system delivers for every Australian.
Responding to the launch of the Review’s terms of reference this week, AIST CEO Eva Scheerlinck said AIST hoped the Review would focus on making super stronger, not weaker.
“While Australia’s retirement income system is delivering for most Australians, too many Australians are still retiring in poverty,” Ms Scheerlinck said. “Australia’s population is ageing, people are living longer and more people are entering retirement with debt or without the security of a home. The system needs to accommodate these challenges,” Ms Scheerlinck said.
AIST will be advocating for the Review to consider a range of issues including the persistent gender gap in retirement savings, gaps in the universality of super, how the Age Pension asset test interacts with the super system and whether the targeting of current tax concessions.
According to the terms of the reference, the Review has not been set up to provide recommendations but rather as a fact base on the current retirement income system.
The Review will identify:
AIST looks forward to contributing to the Review and consulting with our member funds for their input. The consultation paper will be released on 1 November.
A comprehensive four-page roadmap outlining all known regulatory, legislative and administrative change impacting superannuation up until 2022 is now available.
The roadmap/timeline – produced by the ATO’s Superannuation Industry Stewardship Group (SISG) of which AIST is a member – is an excellent visual representation of the regulatory and legislative changes set to occur over the next two years. It includes details on legislation to be introduced relating to the Financial Services Royal Commission, key dates for Government reviews, regulator implementation plans for both ASIC and APRA as well as dates for super changes impacting employers.
ASIC’s Corporate Governance Taskforce has labelled the approach of the big four banks and other ASX-listed corporates to addressing non-financial risks as being immature and underdeveloped, in a report released this week.
The report sets out ASIC’s observations on how the directors and officers of large and complex financial services companies are discharging their duties in relation to oversight and monitoring of non-financial risk.
The report found instances of management operating outside of board-approved risk appetites for non-financial risks. It also found that material information on non-financial risk was often buried in dense, voluminous board packs, with one company providing its board with a 703 page report. ASIC said it was unclear if this was done to inform directors in the most effective manner, or if it was done to “absolve reporters from exercising judgment as to what information should be omitted.”
In total, 60 directors and officers across seven major banking and financial service institutions were interviewed for the report. Additionally, ASIC received more than 29,000 documents from these organisations.
The report found that companies are not putting the same amount of effort into non-financial risk management as they do with financial risks.
ASIC Chair, James Shipton noted that boards cannot afford to ignore the oversight of non-financial risks.
“We have seen first-hand the damage that can result when it is not made a priority. Mismanagement of non-financial risks in the banking and wealth sector has resulted in institutions announcing hundreds of millions of dollars in customer remediation costs,” Mr Shipton said.
The report contains suggestions from ASIC to improve processes surrounding:
Regulations covering unclaimed superannuation are due to be updated next year, with new regulations to accommodate Protecting Your Super provisions for low and inactive balances.
Treasury has released updated draft regulations for comment (deadline October 25), with the current Superannuation (Unclaimed Money and Lost Members) Regulations 1999 scheduled to sunset on 1 April 2020.
The two key changes relate to conditions of release whereby an account will no longer be considered an inactive low balance account if met by a member; and that interest will apply to the payment of unclaimed amounts in relation to inactive low balance accounts.
The regulations also cover a range of provisions relating to:
Responses to the draft regulations should be emailed to firstname.lastname@example.org
The ATO has issued two guidelines in relation to pension tax bonuses and income provisions to ‘non-arm’s length expenditure.’
The first Guideline provides a transitional compliance approach for large Australian Prudential Regulation Authority (APRA) regulated superannuation funds that provide a pension tax bonus to members where the superannuation funds are facing practical difficulties in complying with certain legislative requirements.
The second is a draft Guideline in relation to the compliance approach for complying superannuation funds in respect of applying the non-arm’s length income provisions to ‘non-arm’s length expenditure.
The ATO is seeking feedback on this draft guideline. Submissions can be made by emailing Kenrick Yim via Kendrick.email@example.com
Programs aimed at educating primary school students about money, typified by the Commonwealth Bank’s Dollarmites program, are coming under review from ASIC to determine their suitability. ASIC have released a consultation paper and is seeking feedback from the community and the financial industry to ensure that the programs are in the students’ best interests.
Consumer groups have questioned the value of the programs, estimated to be worth $10 billion, labelling them thinly veiled marketing ploys.
The Government is calling for submissions for the 2020-21 budget to assist in setting budget priorities.
The pre-budget submissions were opened by Assistant Treasurer, Michael Sukkar, with the aim of incorporating the views of individuals, businesses and community groups into the budget process. Submissions are due by Friday, 20 December.
AIST intends to make a pre-budget submission and will provide further updates.
03 October 2019