Policy & Research Archive

AIST Policy News

APRA calls on boards to adopt AIST’s Governance code

APRA has welcomed AIST’s Governance code and urged profit-to-member boards to sign up to it without delay.

Speaking yesterday at AIST’s Governance Ideas Exchange, APRA deputy chair, Helen Rowell, noted that the Code’s eight principles were broadly consistent with APRA’s prudential standard, while its requirements aligned with the better practice examples in APRA’s thematic review.

Ms Rowell said it was important that AIST members did more than just comply with the Code but “seek to live it through meeting its spirit and intent.”

AIST’s code – launched this year – will be mandatory for AIST Australian-based member funds from 1 July 2018. The Code and accompanying guidance are designed to firmly position profit-to-member super funds at the leading edge of international best practice.

The Code mirrors ASX corporate governance principles, applying them in the superannuation context, to reflect an industry that is structured and regulated differently to listed companies. The principles-based code contains 21 requirements that funds must report against annually on an 'if not, why not' basis.

Member compliance with the code will be monitored by an independent body which can make recommendations to AIST on areas where further guidance may be warranted.

AIST heads to Canberra on governance and member outcome bills

Ahead of the Senate vote to decide the fate of the Government’s Bill to introduce a quota of independent directors onto the boards of super funds, AIST is meeting with key senators this week to present our views.

AIST is strongly opposed to all measures in the Bill. We believe it is inappropriate to prescribe a governance model to apply to all funds without evidence that the current system is failing, or that mandating a quota of independent directors would be beneficial to members. Similarly, the preservation of the equal representation model is paramount; with evidence suggesting the model has contributed to profit-to-member sector outperformance.

While the recently released Senate committee report recommended that Senators support the Bill (with a dissenting report from Labor Senator, Chris Ketter), the fate of the Bill is largely in the hands of the cross bench. If the Senate passes the bill, it is unlikely to be introduced to the House of Representatives until the New Year owing to a busy Parliamentary agenda for the final sitting weeks.

In addition to the Bill on independent directors, there are several other bills affecting superannuation before Parliament. The Senate Economics inquiry also examined the Bill regarding the new MySuper member outcomes assessment, director penalties, as well as much-needed refinements to portfolio holdings disclosure requirements. Another Bill was passed this week by the House of Representatives (now to go before the Senate) which seeks to remove the salary sacrifice loopholes and enforce ‘choice of fund’ to employees under enterprise agreements. 

Finally, the Bill to create the Australian Financial Complaints Authority is also in front of the Senate. Another Senate Economics inquiry has recommended passing the Bill, however a dissenting recommendation by Labor senators recommends that the Bill be amended to ensure that superannuation complaints be dealt with through the Superannuation Complaints Tribunal (SCT). The Government is now consulting with cross bench senators in the light of these concerns. AIST has long argued that the nature of problems at the SCT can be sourced to inappropriate funding arrangements.

MySuper transition on AISC’s radar

The Australian Securities and Investments Commission (ASIC) is set to shine a light on the MySuper transition process.

Speaking at AIST’s Legal and Compliance Ideas Exchange today in Melbourne, ASIC senior manager for investment managers and superannuation, Alex Purvis, said ASIC would be looking into disclosure and practices during the four-year transition period, the deadline of which was July 1, this year.

Ms Purvis said issues on ASIC’s radar included members transferring from default products into Choice products. In particular, ASIC would examine what disclosure members may have received about the transfer process.

AIST has long raised concerns about long and unjustified MySuper transition delays in the retail sector. As late as March this year, there was still an estimated $10 billion in accrued default amounts yet to be transferred across to MySuper products.

Ms Purvis also discussed some of the early findings of ASIC’s Employer & Super project and its Insurance and Super project involving more than 40 funds across the industry.

ASIC is examining the benefits offered to employers by super funds, including the scale and extent of corporate hospitality. ASIC found that of the funds involved in its Employer & Super project, 77 per cent gave employers more information about super than the PDS.

Acknowledging concerns among delegates at AIST's Ideas Exchange about the complexity of portfolio holdings disclosure, Ms Purvis noted that the reforms proposed in the Bills allowed a five percent disclosure exception for certain assets, but that this exception was subject to certain caveats that the information must also be commercially sensitive and disclosure must be detrimental to the members of the fund.

Ms Purvis said funds should be aware that the proposed start date for portfolio holdings disclosure in the members’ outcome bill currently before Parliament was 31 December 2018. If the Bill passed in its current form, this would bring forward by a year the current scheduled start date of 31 December, 2019.

On insurance, Ms Purvis said ASIC’s focus was on disclosure and conflicts of interest and it was particularly concerned about arrangements where members are charged as smokers in moving between divisions of funds unless they opt-out.

A final, combined, report on ASIC’s Employer & Super project and its Insurance and Super project will be released mid next year, with an advisory providing some interim findings expected this year.