AIST Policy News - 18 October 2018

AIST Policy News - 18 October 2018


AIST calls for amendments to insurance reforms

AIST has called on the Senate to amend the insurance measures in the Protecting Your Super legislation to avoid significant industry disruption and unintended consumer detriment.

The insurance measures – introduced into the Senate but yet to be debated – were a hot topic of discussion at this week’s AIST Chairs’ Forum in Canberra, which was attended by both Assistant Treasurer, Stuart Robert, and Labor’s Shadow Minister for Financial Services, Clare O’Neil, as well as chairs from 25 AIST member funds.

The proposed insurance reforms include removing opt-out insurance for young members and those with balances of less than $6000.  The measures will require every super fund to re-negotiate their default insurance contracts by 1 July, next year, now just 8 months away.

AIST CEO Eva Scheerlinck said the legislation required modification to better fulfil its objective of preventing fees and insurance premiums from eroding super account balances.

While broadly supportive of the Protecting You Super package – announced by the Government on Budget night - AIST has asked both the Government and Labor to consider several amendments including:

  • Extending the implementation time to 1 July, 2020.
  • Allowing funds to provide opt-out insurance to young people when they demonstrate that their young members – those aged 21 to 24 – have insurance needs.
  • Requiring super funds to directly transfer their inactive accounts to active accounts in other super funds within 30 days, rather than to the ATO, where members are likely to receive a lower return.

Delegates at the Forum noted that the short implementation timeline will create an unequal bargaining position for funds and potentially lead to significant hikes in insurance premiums.  

Both the Assistant Treasurer and Labor’s Clare O’Neil indicated they would consider the issues raised.

The next meeting of the Senate will commence on November 12.


‘Best in show’ default model may be refined

Productivity Commission deputy chair, Karen Chester, has hinted the Commission may back away from its controversial 10 ‘best in show’ default model.

Media reports following Ms Chester’s participation at a Melbourne Institute conference last week suggest that the Commission is considering refining its model in response to industry feedback.

The Productivity Commission recommended in its May draft report that an expert panel pick the 10 best performing funds to act as default funds, with a review to be undertaken every four years. This would effectively remove the default super process from the existing Fair Work Commission process. This process has now been on hold for more than four years leaving some members to languish in under-performing funds.

AIST and others, including Labor’s Chris Bowen, have raised concerns about the unintended consequences of a ‘best in show’ model, with AIST arguing there is no justification to create an entirely new default selection body.

The final report on the superannuation inquiry from the Productivity Commission is due in December. In the meantime, the Commission will release the following supplementary reports on superannuation in the coming weeks:

  • Economies of scale (October)
  • Fiscal impacts of insurance (October)
  • System investment performance — investment, fees and costs, and related parties (November)

ATO making slow progress on lost and unclaimed super

The Australian Taxation Office has released data on lost and unclaimed super, as well as details about the postcodes around Australia where the most unclaimed superannuation sits.

While it’s a good news story that more than $3 billion was consolidated into active super accounts in the last financial year, the total amount of lost and unclaimed super only decreased by $420 million of lost super in the 2017/18 financial year. This means that a further $2.6 billion became lost during the course of the year.

More than one-third of Australians also have multiple super accounts and multiple insurance within super, resulting in unnecessary fee erosion and increasing the likelihood of an account being lost. Most multiple accounts are unintentional. 

Through implementation of the Insurance in Superannuation Code of Practice, in making sensible suggestions for the amendments on the Protecting Your Super Bill, and through our active liaison with the ATO, AIST is committed to reducing the incidence of lost super and consolidating unnecessarily duplicated accounts. Clearly though, a lot more work needs to be done.

Based on postcode data, the ATO has also been able to show the areas around the country where the most lost and unclaimed super accounts sit, with Mackay and surrounding areas taking the top spot with 12,140 accounts worth a total value of $60,172,250 waiting to be reunited with workers.

Details of the breakdown on lost super by postcode can be see here.


ASIC to review school banking

ASIC has today announced it will commence a review of school banking programs in primary schools.

Noting that attitudes and behaviours around money can be shaped from an early age, ASIC will review the benefits as well as risks of school banking programs.

Announcing the review today, ASIC’s Deputy Chair, Peter Kell said: “Transparency around school banking programs is important.  ASIC wants to understand the motivations and behaviours around school banking programs to ensure they ultimately serve the interests of young Australians, and to enable school communities to have an understanding of the potential impact of these programs.”

ASIC will consult with various stakeholders including from the education sector, consumer organisations, other regulatory agencies, as well as the banks offering the programs.

It is expected the review will be complete by mid-2019.


Indigenous report provides guidance on further action

AIST has released a report on the recent Indigenous Roundtable in Melbourne that includes a list of initiatives for funds to consider.

The report detailing the event held in August is now available on our website.

The report provides an overview of the themes explored on the day, a summary of each session and key initiatives highlighted by Roundtable participants for funds to consider in a bid to improve the outcomes of their Indigenous members.


Lack of data will render product design legislation ineffective

AIST has reiterated its concerns about draft legislation that aims to reduce the proliferation of products that are not in the best interests of members.

In a submission to the Senate Economics Legislation Committee, AIST notes the Treasury Laws Amendment (Design and Distribution Obligations and product Intervention Powers) Bill 2018 will be ineffective due to the lack of information at both a system and product level across all super products.

We note that there are currently more than 40,000 competing super products without any uniform disclosure in the Choice sector. Without sufficient disclosure and reporting, we question how ASIC will be able to compile the evidence needed to investigate specific products.


Gateway body set to focus on new payments platform

The Gateway Network Governing Body has signaled it will focus on the New Payments Platform (NPP) and other initiatives following the progression of Single Touch Payroll.

The GNGB is the governance body overseeing the security of and compliance with the Gateway Standards with representatives from AIST, ASFA, FSC, ABSIA, Gateway Operators and an employer representative. 

Members attending last week’s annual general meeting of the GNGB agreed the body could strategically position any involvement with NPP given the GNGB’s gateways standards work. 

Other key items discussed at the AGM were:

  • 2017-2018 was the last year of initial funding for the GNGB from Government grants administered by the ATO. Going forward, the GNGB will be funded through 85% provided by the Government from the APRA superannuation levies and 15% from Gateway Operator Fees.
  • Security of the gateway network is reviewed by the GNGB through an annual audit program and a trial business continuity planning program. 

ACSI receives 5th signatory to its Asset Owner Stewardship Code

Following the launch of the Australian Asset Ownership Code in May, the Australian Council of Superannuation Investors has added Cbus to their list of super fund code adoptees.

Launched in 2018, the Code aims to increase the transparency and accountability of stewardship activities in Australia, including exercising voting rights, company engagement, monitoring asset managers and financial system advocacy.

Cbus stated their support for the principles and guidance outlined in the Code designed to promote greater transparency and accountability in how the fund undertakes its stewardship activities.

Cbus Chief Investment Officer, Kristian Fok, noted the fund’s long history of active ownership, saying: “Responsible investment for Cbus means taking environmental, social and governance risks and opportunities into account in the investment decision making process, exercising positive influence through our investments and the way the fund operates. Our approach supports the delivery of strong returns to members.”

Cbus joins AustralianSuper, Christian Super, HESTA and VicSuper as signatories to the Code.

ACSI CEO, Louise Davidson said the Code raises the bar on signatories to proactively manage and disclose their stewardship activities.

“Signing up is an opportunity for asset owners to demonstrate that their intentions are backed by meaningful action. This is a strong basis from which to build trust and to set the tone for stewardship in Australia.” Ms Davidson said.

For more information on the code, visit acsi.org.au


Governance Code Reporting Pilot reports received

AIST’s Governance Code Monitoring Panel has received reports from funds participating in the reporting pilot.

The panel is currently in the process of reviewing the reports received as part of the optional reporting pilot. Before the end of the year the panel will complete their review and prepare their first report for the AIST Board in line with the panel’s Terms of Reference.


Call for participants for ASIC’s survey on new global investor laws

The Australian Securities and Investment Commission (ASIC) is surveying funds about the impact of the recently introduced European investor protection laws and their impact on Australian superannuation fund trustees and fund managers.

The Markets in Financial Instruments Directive II (known colloquially as "MiFIDII") came into effect in the European Union at the start of this year. It has the objective of offering greater protection for investors and more transparency into all asset classes. 

The survey is voluntary and anonymous, with a now extended deadline to October 26. ASIC expects that the survey would take 20 minutes to complete, and that a Head of Equities or Global Head of Trading would be best placed to answer the survey. AIST has expressed its interest in seeing the collated results.

If your fund has not received the survey and wishes to participate, please contact Maan Beydoun (Senior Specialist, Market Supervision, ASIC) at maan.beydoun@asic.gov.au