- AIST Policy News - 12 October 2017
AIST Policy News
AIST appears before the Senate Committee on governance and member outcomes test
AIST has this week appeared before the Senate Economics Committee’ public hearings into Bills introduced by the Government on super fund governance and the MySuper outcomes test.
AIST recommended that the Senate reject the Government’s push to introduce a quota of independent directors on superannuation fund boards, noting that no evidence had been presented that the current profit-to-member governance model was failing members or that the proposed changes would improve member outcomes.
In her opening speech to the Committee, AIST CEO Eva Scheerlinck said mandating independence ignored the fact that layers of independence were entrenched into the profit-to member governance model including independence from management; structural independence; and independence safeguards derived from the broader regulatory framework.
Ms Scheerlinck said AIST supported funds having the flexibility to appoint up to one third of independent directors to fill whole-of-board skill gaps where they existed and that such flexibility was in line with a principles-based approach to governance as adopted by AIST’s new Governance Code.
Ms Scheerlinck also outlined AIST’s concerns that the governance Bill would completely remove equal representation from the legislation despite the trustee representative model having been the cornerstone of member representation and accountability in the superannuation industry for decades.
Ms Scheerlinck said dismantling the governance structure of the most successful, highest performing sector in the superannuation industry would cause unnecessary costly disruption at a time when all super funds were having to deal with a raft of other regulatory changes and policy proposals.
Commenting on the Bill to legislate a members’ outcome test for MySuper products, AIST’s senior policy adviser, Karen Volpato, said the Bill ignored underperformance in the Choice sector, adding that the outcomes test should be extended to Choice products.
Ms Volpato said a lack of legislation in the Choice sector had led to a proliferation of member so-called choices, with as many as 40,000 highly expensive and underperforming options in the retail sector. Ms Volpato noted that the system was not in a position despite all the raft of changes to benchmark fees, costs, and performance.
Ms Volpato said a data-reporting framework was needed to ensure data was collected in formats that allowed meaningful comparisons.
Also appearing before the Senate hearing were ISA’s director of Public Affairs, Matt Linden and the ACTU’s capital stewardship officer, Brian Daley.
AIST will be meeting with members of the Senate ahead of the Committee releasing its report on the Senate hearing, which is due in late October.
Productivity Commission responds to industry concerns about fund survey
The Productivity Commission will re-design key aspects of the survey sent to super funds last month following concerns raised by AIST member funds, AIST itself and Industry Super Australia about the functionality, quality and confidentiality of the survey.
The fund survey is one of three surveys that the Commission is undertaking as part of its review of the competition and efficiency of the superannuation system.
In a meeting with industry groups this week and a follow up letter, the Commission said it would ‘re-program’ the survey and conduct more pilot testing with the view to re-sending it to funds in one to two weeks. Funds will then be given five weeks from the date of resumption to complete the survey.
Since the original fund survey was sent out last month, AIST member funds have raised many concerns about the survey’s poor design. Concerns included that many of the questions were too subjective or vague and that some of the information requested was already publicly available. Funds also have legal and contractual concerns, which the Commission has indicated it will address but as a separate issue.
The Commission has also confirmed that a member survey is currently underway, and that it plans to send a CEO survey on fund governance about a week before the revised fund survey is due to be returned.
AIST will keep members informed of developments, particularly in relation to the governance survey. For further information, contact David Haynes AIST senior policy manager Dhaynes@aist.asn.au
Senate hearing on establishment of Australian Financial Complaints Authority
A Senate hearing on the establishment of a single body for financial services complaints has gone ahead in Canberra and Sydney this week.
The Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill was referred to the Senate Economics Legislation Committee last month, with the report due to be released next week.
AIST’s submission on the Bill to establish AFCA notes that success of the new complaint authority will depend on how its terms of operations are set and how the transition from existing arrangements – which includes the SCT – are handled.
AIST believes that it is important that the super industry is consulted on key issues of AFCA’s establishment including ongoing funding, funding during the transition and AFCA’s terms of reference.
The AFCA transition team is holding an industry roundtable on Tuesday next week to discuss and get feedback on these and other issues regarding the proposed transition process. AIST will be attending.
Members wishing to provide input to the discussion or seeking more information can contact AIST research officer Jake Sims at email@example.com
APRA should enhance disclosure of cost of regulation: stakeholder survey
Participants in the APRA Stakeholder Survey have called for the regulator to enhance its analysis of the relative costs and benefits of regulation on the industry.
More than 320 finance sector companies including banks, super funds, credit union and insurers have completed the stakeholder survey.
Results were largely positive, with 95% of responsible entities that completed the survey agreed that APRA’s supervision of their industry helps protect the financial well-being of the Australian community.
However regulated entities identified with lower scores when asked if APRA’s prudential framework sufficiently considers the costs of regulation imposed on industry (score of 2.8 – with 2 being disagree and 3 being neutral).
In a media release issued this week, APRA Chairman Wayne Byres said the results were broadly consistent with the previous Stakeholder Survey conducted in 2015.
“Though the 2017 survey picked up some slight variations compared with two years ago, it confirmed APRA has an overwhelmingly positive and productive relationship with the entities it regulates.”
Financial Ombudsman Service receives record number of disputes
The Financial Ombudsman Service (FOS) annual review has shown a 16% increase in the number of disputes received in 2016-17.
The annual review shows that FOS received 39,479 disputes, a 16% increase from last year, after a 7% increase the previous year.
The increase was driven by continued growth in general insurance disputes. The number of general insurance disputes received (13,200) increased by 2,612, accounting for about 38% of the overall increase.
The bulk of disputes received are credit disputes (43%), followed by general insurance disputes (35%), deposit-taking disputes (7%), payment system disputes (5%), investments and advice disputes (5%), and life insurance disputes (4%).
The figures come out as a Senate hearing is underway focusing on the establishment of a one-stop-shop for complaints, the Australian Financial Complaints Authority (AFCA), that would see the Financial Ombudsman Service no longer exist as a separate entity.
Applications open: leader development scholarships for women
Women & Leadership Australia is offering women in financial services with grants of between $3,000 and $8,000 to enable participation in a range of leadership development programs.
The scholarship funding is provided with the specific intent of providing powerful and effective development opportunities for finance sector women; however the funding is strictly limited and has to be allocated prior to the end of 2017.
Find out more and register your interest by completing the Expression of Interest form here prior to December 15, 2017: https://www.wla.edu.au/funding