AIST responds to Your Future Your Super draft legislation
AIST has called for the proposed Your Future Your Super laws to prioritise underperformance ahead of stapling members to funds and for the Government to reconsider its approach to other key measures in the draft legislation.
While AIST supports the policy intent of the legislation to empower members and hold funds account for performance, we believe that this will not be achieved without substantive changes.
Our submission and accompanying media release released this week point out that key aspects of draft legislation are not in line with Productivity Commission recommendations on how to appropriately address and measure underperformance in the super system. This includes ignoring the Commission's recommendation to allow the regulator to wind up underperforming funds and its recommendation to performance test all APRA-regulated super products including Choice products.
Other key concerns raised in our submission include:
- The high cost to stapling workers to underperforming products (see coverage in the Australian Financial Review, the Age/SMH and the New Daily)
- The exclusion of administration fees in assessments of underperformance
- The carve-out of non-My Super products – where underperformance is most severe - from performance testing
- Government overreach regarding the power it seeks to potentially ban certain investments (see coverage in Daily Telegraph, & other News Ltd outlets)
- the introduction of the financial best interests duty that includes a reverse burden of proof for trustees on fund expenditure with no materiality threshold
- the administrative burden that employers face in record keeping on stapling
Early release scheme closes with $36 billion withdrawn
The COVID early access to super scheme has now closed with 3.4 million Australians withdrawing nearly $36 billion, with 1.4 million withdrawing twice.
APRA’s latest data shows that in the week to 20 December, 21,000 early release applications were received by funds of which 69 per cent were initial applications and 31 per cent were repeat applications.
While applications are still being processed, the scheme closed on December 31. When the Scheme was introduced back in April last year, the Government estimated that $27 billion would be withdrawn.
As at 20 December 2020, 98 per cent of applications received since inception had been paid.
Meanwhile, the ATO has estimated that 2 to 4 per cent applicants may have been ineligible for the early release scheme.
While no penalties have yet been imposed, the ATO is investigating more than 1900 applicants who may have gained access to the super knowing they didn’t meet the criteria.
Re-cap on key policy announcements
December was a busy month for regulatory announcements. In case you missed AIST’s policy alerts in the lead up to Christmas, here is a re-cap of key developments with links for more detail:
Dec 22: APRA releases updated draft reporting standards as part of its data transformation project to assist funds in preparing for the implementation of the new reporting standards... read more
Dec 18: APRA releases the 2020 Dec MySuper Product Heatmap advising that in the 12 months since the first heatmap was published, 10 million MySuper members are paying less in total fees and costs and an estimated $408 million saving... read more
Dec 15: ASIC and APRA issue joint letter to RSE licensees in relation to the member outcome obligations and the DDOs to assist RSE licensees better understand the way in which these obligations interact... read more
Dec 14: ASIC releases Report 675, ‘Default insurance in superannuation: Member value for money’which examines the value of default insurance... read more
Dec 11: ASIC releases regulatory guide 274 to provide guidance on new design and distribution obligations and extends start date to 5 Oct 2021... read more
Dec 10: Senate agrees to a 12 month extension to Section 56 of the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 concerning the extension of indemnification prohibitions... read more
Dec 9: Government’s Financial Sector Reform Bill is introduced to the House of Representatives. The Bill limits the charging of advice fees but allows for funds to continue to offer intra-fund advice, and importantly – in a change from the draft legislation - allows for funds to deduct fees for non-ongoing financial advice from MySuper products... read more
Dec 8: ASIC Class Order [CO 14/443] defers the first reporting day for Portfolio Holdings Disclosure to 31 December 2021... read more
AIST’s weekly update on the status of legislation
The current status of superannuation Bills currently before Parliament can be found here.