- AIST Policy News - 22 February 2019
AIST Policy News - 22 February 2019
Protecting Your Super reforms – what you need to know
The superannuation industry is still coming to terms with the impact of the Protecting Your Super legislation - one of only a handful of super bills to successfully pass through Parliament in the February sitting that wound up last night.
Super funds are now faced with the implementation challenge of measures coming into effect from 1 July 2019. AIST is now advocating facilitation measures to ensure the more efficient and lower risk implementation of these measures.
While the Assistant Treasurer, Stuart Robert MP, previously indicated that the government would defer the implementation of theProtecting Your Supermeasures if the legislation was only passed in 2019, this did not occur.
The Protecting Your Super legislation that fully passed Parliament on 14 February comes into effect on 1 July 2019. The final bill:
- Caps fees on <$6,000 accounts at 3% and bans exit fees
- Ceases insurance for accounts inactive for 16 months or more, regardless of balance
- Requires transfer of 16 month inactive <$6,000 accounts to the ATO
- Requires ATO to transfer matched accounts to active accounts within 28 days of matching where the total exceeds $6,000
As a result of successful Greens’ amendments:
- The provisions prohibiting opt-out insurance for under-25s or inactive accounts <$6,000 were removed
- The period of inactivity for both insurance and transfer to the ATO was increased from 13 to 16 months
- For transfers to the ATO (but not for insurance), some activities were added to remove members from the definition of low-balance inactivity: changes to insurance, investment options, binding beneficiary. Notifying the ATO (but not the member’s fund) or the fund being ‘owed’ an amount will also stop an account being transferred.
The Government subsequently introduced thePutting Members Interests FirstBill to prohibit opt-out insurance for both members under-25s and inactive accounts <$6,000 but these were not considered before Parliament rose until 2 April – the day of the Federal Budget. As the Federal Election will be called shortly after the Budget, these further changes will not be considered in the life of this Parliament.
The transfer of inactive accounts with balances of less than $6,000 to the ATO is scheduled to take place on 31 October. The uncertainty about the implementation date and the changes criteria for transferring accounts is going to be challenging for super funds and administrators. AIST will be consulting with the ATO for implementation to include a facilitation period.
Millions of accounts may be transferred to the ATO, with the net number of accounts in the system reducing by the same number regardless of the numbers of transfers back from the ATO. While this is driven by sound policy, this will challenge some funds, and may force changes to arrangements with administrators. The complicated definition of ‘inactivity’ applying just to this provision will require changes to system recording and reporting.
The requirement to cease insurance for inactive accounts in the legislation differs from the Insurance Code in not having a dollar threshold and having a 16 month rather than a 13 month requirement. Cessation under the Code is for inactive accounts under $6,000. The Code-owners (including AIST) will be reviewing the Code to consider their approach to alignment with the legislation.
ASIC have opened their consultation period on the Protecting Your Super package with submissions due 1 March 2019.
For more information contact AIST Senior Policy Manage David Haynes at email@example.com
Key super bills set to lapse after Parliament adjourns
With Parliament adjourned until April, the future of four remaining super bills is uncertain. A crowded Parliamentary agenda for the next sitting, means the bills ─ which include royal commission amendments to the member outcomes bill, 2018 budget measures and the government’s new insurance bill ─ have virtually no chance of passing both Houses before the expected May Federal election. Read more
A fifth bill - the amended members outcome bill – also faces uncertainty. This bill was amended by the government to include the first of the Hayne royal commission recommendations. Having passed through the Senate, this Bill had been expected to get ticked off by the House of Representatives yesterday, but other matters got in the way. This bill contains civil penalties for super fund trustees who fail to act in their members' best interests. It also contains measures that lower the bar significantly for regulators to take action against trustees "treating" employers to win or retain their business.
Meanwhile, three other super bills – including the Protecting Your Super Bill – that have passed through Parliament in recent weeks are expected to receive Royal Assent shortly. All legislation not given Royal Assent prior to the election being called will lapse and new legislation will have to be introduced to the new Parliament.
Click here for a full status update on key super bills before Parliament.
Strict guidelines required to stop early release predators
AIST has called on the government to ensure that strict guidelines are in place for the provision of early release of superannuation.
In a submission to Treasury, AIST noted that policy change is needed to prevent predatory operators manipulating the superannuation system to take advantage of these grounds of release.
Recently, businesses have made misleading and deceptive statements to members in attempting to facilitate the early release of superannuation.
AIST has maintained that accessing superannuation for purposes other than retirement may have adverse consequences, including negative impacts for the member for things such as retirement adequacy.
AIST also put it to Treasury that superannuation should not be viewed by governments as the solution to social, structural or systemic problems in society.
AIST’s submission calls for amendments to strengthen the protections of consumers in regard to accessing superannuation for mental illness, overseas medical treatment, dental treatment and family and domestic violence.
The full submission will be available on AIST’s website in the coming days.
ASIC outlines its plan of action on royal commission
The Australian Securities and Investments Commission (ASIC) has outlined its planned actions to the Hayne royal commission recommendations in an update released earlier this week.
The update also provides a report of ASIC’s progress to changes commenced in 2018 to strengthen its governance and culture and realign enforcement and regulatory priorities.
There are 12 royal commission recommendations specific to ASIC. Another 34 recommendations – that require legislative change - extend ASIC’s remit and power and require more of the entities that ASIC regulates.
ASIC noted that the recommendations and current reforms will provide more than 60 additional penalty provisions that it will be able to action. Coupled with the recently passed Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, ASIC will wield much greater power to deter and penalise misconduct.
Recommendations made by the royal commission that involve reforms that ASIC has previously advocated for include:
- an expanded role for ASIC to become the primary conduct regulator in superannuation
- the extension of Banking Executive Accountability Regime (BEAR)- like accountability obligations to firms regulated by ASIC, with their focus being on conduct
- the end of grandfathering of Future of Financial Advice (FOFA) commissions
- the extension of the proposed product intervention powers and design and distribution obligations to a broader range of financial products and services
- the extension of ASIC’s role to cover insurance claims handling and the application of unfair contract terms laws to insurance
- reforms to breach reporting
- ASIC being provided with a directions power
As part of the royal commission recommendations, ASIC also received 11 specific referrals in relation to eight entities. ASIC has stated it will not comment on any potential investigations but will provide updates when appropriate to do so publicly.
APRA commits to royal commission recommendations
The Australian Prudential Regulation Authority (APRA) has committed to implementing ten recommendations from the Hayne royal commission.
APRA has released a document outlining their response to each recommendation, along with the action it is currently taking to implement each recommendation.
Included in the ten recommendations is the need for additional scrutiny for related party engagement, as well as amending Prudential Standard SPS 250 to require RSE licensees to be satisfied that the rules by which a particular status is attributed to a member in connection with insurance are fair and reasonable.
APRA is currently completing a post-implementation review of the superannuation prudential framework and will address these recommendations as part of that work.
Additional recommendations concerning APRA include remuneration, land valuations, revised prudential standards and guidance, and the supervision of culture and governance.
Rule change to allow AFCA to accept more complaints
The remit of Australian Financial Complaints Authority (AFCA has been expanded for a period of 12 months to accept eligible financial complaints dating back to 1 January 2008.
In most cases, AFCA is currently only able to consider matters that have occurred within the last six years. When a complaint has been through a financial firm's internal dispute resolution process, this timeframe is reduced to two years.
The latest rule change will allow many more people to have their matters properly considered.
AFCA will consider newly eligible complaints between 1 July 2019 and 30 June 2020, following the AFCA rules being updated.
Expert panel announced for APRA capability review
The government has announced the three-member panel that will undertake the capability review of the Australian Prudential Regulation Authority (APRA) recommended by the royal commission.
Treasurer Josh Frydenberg announced that the panel would be chaired by Graeme Samuel AC, along with Diane Smith-Gander and Grant Spencer.
Mr Samuel was formerly the chair of the Australian Competition and Consumer Commission and president of the National Competition Council.
Ms Smith-Gander has previously been a senior executive at Westpac and partner at McKinsey & Company and is currently an adjunct professor in corporate governance at the University of Western Australia.
Mr Spencer was the former deputy governor and head of financial stability, and former acting governor, at the Reserve Bank of New Zealand and has held former senior roles at the International Monetary Fund.
The review will include APRA’s capability to regulate superannuation entities for the benefit of members, the role of enforcement activities and coercive powers and the supervision of culture, governance and remuneration in regulated institutions.
The panel’s work will commence in March 2019 and will report to government by 30 June 2019.