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AIST has welcomed Treasury’s release of the Retirement Income Covenant paper which, importantly, recognises that different funds have retiring members with different characteristic and needs. Read report
The Retirement Income Covenant position paper outlines a new covenant that will be introduced into the Superannuation Industry (Supervision) Act 1993 that will ‘codify the requirements and obligations for superannuation trustees to improve retirement outcomes for individuals’.
Specifically, the covenant will impose a fundamental obligation of trustees to formulate, review regularly and give effect to a retirement income strategy to be in place from 1 July 2022. APRA, ASIC and the ATO will be responsible for regulating trustees’ compliance with the new covenant. The regulatory bodies will also provide information on how trustees can comply with the new covenant.
The introduction of a principles-based retirement income covenant is in line with AIST’s long held position that requiring funds to offer a one-size-fits-all retirement income product would not be in the best interests of many members.
It is therefore very pleasing that the position paper does not propose mandating particular products, such as annuities or the previously proposed CIPRs. This principles-based approach recognises that the age and account balance profile of funds vary enormously, and what is suitable for one member in retirement might not be suitable for another.
Subject to the passage of legislation, trustees will be required to have a retirement income strategy in place from 1 July 2022.
AIST will be responding to the RIC paper and will be holding a roundtable to inform our submission on Thursday 29 July 2021 at 2:00pm – 3:00pm. Submissions are due on 6 August.
If you would like to participate, please contact Carlos Lopez, Policy and Regulatory Analyst, at email@example.com.
The Government’s release this week of the Exposure Draft Legislation and supporting documentation on the Financial Accountability Regime (FAR) provides greater clarity on the likely shape of the new legislation and how it will apply to superannuation funds.
As recommended by the Hayne Royal Commission, the FAR will extend and replace the Banking Executive Accountability Regime, with the key objective to improve the operating culture and increase transparency and accountability across APRA-regulated sectors in relation to prudential and conduct-related matters.
For superannuation, the new rules will begin on the latter of 1 July 2023 or 18 months from Royal Assent.
The FAR includes accountability obligations for entities and accountable persons (APs) and entities must produce:
For RSEs with FUM greater than $10bn, accountability statements and maps must be reported to the regulator. Smaller entities still need to prepare the documentation, but not regularly report it.
Another key element of FAR is deferred remuneration: entities will be required to defer 40% of the variable remuneration of all their APs for at least four years, unless the deferred amount is equal to or less than $50,000 or if variable remuneration is not a feature of the AP’s remuneration structure.
AIST will be responding to the consultation including holding a roundtable to discuss the FAR with members. Submissions are due on 13 August.
Links to other relevant FAR materials can be found below:
Exposure Draft Explanatory Materials
Information paper on joint administration of the FAR
Policy paper on list of prescribed responsibilities and positions
Questions and Answers
Treasury has released an exposure draft establishing the Compensation Scheme of Last Resort.
The scheme implements recommendation 7.1 of the Financial Services Royal Commission, which highlighted an inadequate redress arrangement for consumers and small business for small losses.
The establishment of the CSLR will provide limited compensation where a determination issued by the Australian Financial Complaints Authority (AFCA) remains unpaid and the determination relates to a financial product of service within AFCA’s scope.
In its response to the Royal Commission, the Government committed to:
The funding model – based on subsectors, one of which is superannuation – means superannuation funds will incur a levy for potential claims arising. The funding model also includes the cost for setting up the CSLR.
AIST welcomes mechanisms that support affected consumers and small business, but it reiterates its concerns with the superannuation sector funding the scheme noting uncompensated losses are not an issue in the sector, and industry levies already exist that ensure losses are compensated, including AFCA levies.
AIST will be making a submission in response to the Proposal Paper and welcomes feedback from its members. For any queries on the consultation, please contact Carlos Lopez, Policy and Regulatory Analyst, at firstname.lastname@example.org.
APRA has published additional FAQs to provide further guidance for funds on meeting the reporting standards for Phase 1 of the Superannuation Data Transformation.
The new/updated FAQs include information relating to SRS 332.0 Expense Reporting, SRS 611.0 Member Accounts, and SRS 706.0 Fees and Costs.
APRA has also released the slides presented during their workshop last week that aim to clarify concerns in relation to 332.0 Expense Reporting.
Next week’s policy news will include an update on AIST’s meeting with APRA today to discuss ongoing industry feedback on the new expense reporting requirements.
The Government has today released a consultation paper for a strategic assessment of its Consumer Data Right (CDR) initiative.
The CDR initiative is part of the Government’s $1.2 billion Digital Economy Strategy and gives consumers the right to transfer their data to third parties of their choice so that they can gain more value from their data.
The Government is inviting input on the consultation paper for a Strategic Assessment, which will inform the implementation roadmap for prioritisation and sequencing future datasets and sectors for economy wide expansion of the CDR. Submissions close on 18 August 2021.
ASIC is consulting on proposed updates to its guidance on the prohibition on the hawking of financial products.
ASIC’s updated regulatory guide reflects the reforms to the anti-hawking regime under the Financial Sector Reform(Hayne Royal Commission Response) Act 2020, which is due to commence on 5 October 2021.
The reforms strengthen and consolidate the three existing hawking prohibitions into a single prohibition covering all financial products. The reforms take a technology neutral approach, meaning the ban applies to all forms of real-time communication. The prohibition incorporates for the first time a definition of unsolicited contact, requiring that consent given by a consumer be positive, voluntary and clear.
ASIC’s guidance gives additional clarity on how the changes may affect commercial practices, systems and processes and is designed to help the industry prepare for compliance with the new regime once it commences.
ASIC seeks public comment on the draft guidance until 17 August.
ASIC will publish its final guidance in September 2021, ahead of the revised hawking prohibition commencing on 5 October 2021.
Stay up-to-date on the current status of superannuation Bills currently before Parliament here.