- AIST Policy News - 22 March 2018
AIST Policy News - 22 March 2018
Consumers losing market power to shareholders: Productivity Commission
The Productivity Commission has raised concerns that banking consumers are losing their market power to shareholders.
In a draft report released last month on Competition in the Australian Financial System, the Commission also notes that product proliferation across the financial system is poorly aligned with consumer interests.
The report – which primarily covers banks and insurance providers – has a strong focus on advice provided to consumers and notes there is need for reform.
The report includes a draft recommendation that all ‘general advice’ be renamed, and that the term ‘advice’ should only be used for personal advice.
AIST has recommended that legislation be amended to tighten the definition of general advice to exclude advertising and sales activities and exclude all activities that generate commissions. AIST has also recommended that consumer testing of key disclosure documents be undertaken, with the methodology to be the subject of prior public consultation.
ASIC is due to release a final report by July 2018.
For further information, contact Karen Volpato, Senior Policy Advisor firstname.lastname@example.org or on 0419 127 496.
Concerns about ASIC’s disclosure requirements on new complaints authority
The Australian Securities and Investments Commission (ASIC) is consulting on regulatory guidance regarding proposed external dispute resolution disclosure obligations.
The regulatory guidance sets out obligations for superannuation funds to update member disclosures about external dispute resolution (EDR).
ASIC has proposed that by 1 November 2018, providers must update information about EDR in disclosures and communications to consumers.
AIST has concerns that funds will not have the capacity to update PDSs by this deadline and we are now working with the regulator to resolve these issues.
AIST will be preparing a submission and welcomes member feedback. Please contact Ailsa Goodwin, Head of Advocacy at email@example.com by Wednesday 28 March 2018.
ASIC voices support for insurance code
ASIC has voiced its support for the Insurance in Superannuation Voluntary Code of Practice, describing it as an important and positive step.
Speaking at AIST’s Conference of Major Super Funds in Brisbane last week, ASIC Senior Executive Leader, Jane Eccleston, welcomed the Code’s focus on members’ needs, the complaints process and complaints handling.
But Ms Eccleston also noted that there was room for improvement on how funds deal with the customer experience of insurance.
Ms Eccleston revealed figures on the time taken to address members’ complaints: “The mean time taken to address complaints is 117 days. Given that there is a 90 day requirement in the law, this is very concerning to us,” she said.
Ms Eccleston said while the majority of trustees were meeting the regulator’s expectations by being proactive in providing information on when members' insurance cover was about to cease, some trustees needed to improve this process.
Commenting on default processes – which have also come under scrutiny by ASIC recently - Ms Eccleston said that, in 10 per cent of cases, members were still being wrongly categorised as smokers with their premiums affected as a result.
Meanwhile, Financial Services Minister, Kelly O’Dwyer, has this week issued a warning that the Government will step in and take action on insurance in super if the industry does not act.
Speaking at the annual conference of the Financial Services Council, Minister Kelly expressed concern about the impact of insurance premiums on retirement savings and the cost of insurance cover, especially for low income, younger or disengaged members.
The Minister called on the Government and the industry to work proactively on fixing these issues, noting that while work had been done to date, “the results have not matched the ambition of those leading the work.”
The Minister criticized the fact that the Insurance Code was not binding on trustees and reiterated that “where industry cannot or will not act, the Government will step in and take action.”
The full text of the Minister’s speech can be read here.
AIST is continuing to encourage our member funds to subscribe to the Insurance in Super Code of Practice, and notes a large number of funds have already adopted the Code while others are on the verge of doing so.
ATO outlines reform agenda
The Australian Tax Office has outlined its forward agenda for super reform. In a speech to AIST's Conference of Major Super Funds last week, ATO Deputy Commissioner James O’Halloran provided a comprehensive overview of the often overlapping and intersecting program of reforms that the ATO has responsibility for.
The ATO also acknowledged that AIST and our member funds are central to the ATO’s engagement with the super industry in implementing a major reform agenda.
The regulator’s wide-ranging agenda includes:
- further implementation of SuperStream and the emerging benefits to members, employers and super funds
- increasing use of ATO enabling services such as SuperTICK and SuperMatch2
- implementation of the 2016 budget changes
- increased efforts to improve the prevention and detection of SG non-payment
- improving Indigenous access to super accounts
- production of detailed super fund diagnostic reports
- reuniting people with their lost and unclaimed super
- re-engineering of super fund reporting to the ATO
AIST acknowledges the important role played by the ATO in this period of major reform and broad ongoing change. We look forward to continuing to work closely with the ATO to implement reforms that benefit the community and promote super fund members' interest.
A copy of the speech can be read here.
Draft Bill for product design and distribution
The Government has released a draft Bill on product design and distribution. The Bill proposes that providers must determine a target market for products and distributors must take reasonable steps to ensure that products are distributed to the target market.
The obligations would not apply to the design or distribution of MySuper products but would apply to the design and distribution of choice products.
AIST supports the Bill but has a number of reservations:
- The proposed design and distribution obligations do not apply to legacy products, and AIST advocates that they should.
- The proposed obligations do not apply to providers of products to platforms. AIST has advocated that the obligations should apply across the full chain of product development and distribution, including product providers.
AIST’s submission on the Bill can be viewed here.
For further information, contact Karen Volpato, Senior Policy Advisor firstname.lastname@example.org or on 0419127496).
Financial advisor pathway guidance released
The Financial Adviser Standards and Ethics Authority (FASEA) has released guidance on financial adviser qualification pathways for consultation. Five pathways of education have been proposed to ensure that financial advisors can meet their new education requirements by the due date of 1 January 2024.
Under the proposed pathways, existing advisers will need to undertake either a relevant degree, or between one and three bridging courses, including a course that focuses on the new Code of Ethics developed by the Standards Authority. Consultation documentation is available here, and consultation is open until 29 June 2018.
For more information, please contact Richard Webb, Policy & Regulatory Analyst at email@example.com .
APRA calls for industry input on new data management system
APRA is encouraging the industry to provide input on the development of its new data collection system.
Speaking at the Conference of Major Super Funds last week, APRA General Manager, Stephen Glenfield, said APRA would be holding industry roundtables to help shape the new data collection system, which will replace the current D2A system.
Mr Glenfield acknowledged the importance on data and the concerns that funds had about cyber security.
“Whenever I go around to boards, a question I always ask is, “what’s keeping you awake at night?” and it’s invariably cyber security.”
For more information and to provide feedback, click through to APRA’s data collection system webpage.
ATO to contact 100,000 members on unclaimed and lost super
The Australia Tax Office will step up its bid to reunite members with lost or unclaimed super by contacting more than 100,000 people over the next few months.
Speaking at the Conference of Major Super Funds last week, ATO Deputy Commissioner, superannuation, James O’Halloran, said in the past four years, 1.68 million accounts valuing $1.82 billion had been consolidated, transferred or claimed by fund members.
Mr O’Halloran said the majority of those who took action to find their super were aged between 25-40, and there were more women than men who were reunited with their unclaimed super.
Mr O’Halloran stated that despite theses results, there were still 2.3 million Australians with 3 or more super accounts.
ASIC extends transition period for super and retirement calculators
ASIC has extended – to 1 July 2019 – the time that providers of retirement calculators have to comply with the requirement that generic financial calculators must account for inflation.
If a generic financial calculator makes an estimate of a future return or payment, it must adjust for inflation using an assumed rate of inflation of 2.5% (being the mid-point of the Reserve Bank of Australia's target range for inflation over the cycle). As a result of the extension, this requirement will not apply to retirement and superannuation calculators until 1 July 2019.
ASIC has postponed the commencement of this requirement for superannuation and retirement calculators because there are superannuation reforms that may impact on how superannuation calculators should present and calculate estimates in the future. These reforms have been deferred until 1 July 2019. During this period, ASIC will further review the suitability of the prescribed discount rate for calculators that produce retirement estimates, taking into account the interests and further views of consumers, superannuation and retirement calculator providers, and actuaries.
ASIC will monitor the impact of these reforms to assess the ongoing appropriateness of the requirement to account for inflation.
This extension does not affect other provisions of relief for calculators.
For more information visit here.