- AIST Policy News - 6 September 2018
AIST Policy News - 6 September 2018
Royal Commission to examine insurance
Insurance in superannuation will be one of several issues concerning both life and general insurance to be covered in the next round of Royal Commission public hearings, which commences in Melbourne on Monday.
The sixth round hearings - to run for two weeks from Monday 10 September to Friday 21 September - will consider issues associated with the sale and design of life insurance and general insurance products, the handling of claims under life insurance and general insurance policies, and the administration of life insurance by superannuation trustees. The hearings will also consider the appropriateness of the current regulatory regime for the insurance industry.
The Commission will reference case studies, including the natural disaster case studies that were originally to have been examined in the fourth round of public hearings. Entities involved the life insurance case studies include AMP, ClearView, CommInsure, Freedom Insurance, REST, and TAL. The regulatory regime will cover evidence from the Code Governance Committee, Financial Services Council and Insurance Council of Australia.
During the hearings, evidence will also be given by consumers of their particular experiences.
Further topics may be included, and the list above will be updated accordingly before the hearings commence.
AIST is currently preparing a submission to the Commission on questions raised by the senior assisting counsel, Michael Hodge, in his closing statement for the Round Five Hearings.
Shared super portfolio following Government reshuffle
After a tumultuous week in Federal politics in which Scott Morrison replaced Malcolm Turnbull as Australia’s new Prime Minister, Treasurer Josh Frydenberg has confirmed he will be overseeing superannuation policy with a second Federal minister.
Mr Frydenberg has indicated that his responsibilities include:
- Development of budget, economic and fiscal policy;
- Responding to the Banking Royal Commission;
- Major foreign investment decisions; and
- International engagement on monetary matters
Although the Treasurer will be overseeing superannuation policy for the Government, a second minister will be sharing aspects related to the superannuation industry.
Assistant Treasurer Hon Stuart Robert will cover Financial services; Day to day management of superannuation; Competition and consumer policy and the Australian Bureau of Statistics.
Government backs down on mandating independence
AIST has welcomed the Government’s decision to abandon its plan to mandate one-third independent directors on superannuation boards.
AIST has long argued against mandating independence on profit-to-member superannuation boards, noting that such a move would water down the role of the representative trustee governance model that has served members so well.
AIST supports profit-to-member funds having the flexibility to appoint up to one third non-representative directors.
In an opinion piece published in the Australian Financial Review, AIST’s Eva Scheerlinck said the Royal Commission had exposed that good governance required non-conflicted fund structures and noted that independent directors had not served members of retail funds well.
Ms Scheerlinck said evidence examined in the Round Five hearings on superannuation had clearly showed that the corporate group's influence is pervasive and entrenched, with retail trustees elevating shareholder interests above those of members.
Government scraps plans to raise pension access age to 70
The Prime Minister has announced that previous Coalition plans to raise the pension access age to 70 will be abandoned.
The announcement from the Prime Minister was welcomed by AIST, other industry groups, unions and superannuation bodies who have long spoken against the plans.
AIST CEO Eva Scheerlinck described the Government’s decision to scrap the policy as a big win for older Australians.
"We welcome the Coalition’s recognition that raising the Age Pension access age to 70 is flawed policy that is out of step with the reality for many older and potentially vulnerable Australians," Ms Scheerlinck said.
AIST’s commissioned research with the Australian Centre for Financial Studies in 2014 found up to 40 per cent of older Australians do not get to choose when they retire.
The research highlighted concerns for those working in community and personal services, notably in clerical and administrative roles, as well as sales workers and labourers were between 35 and 50 per cent more likely to retire before the age of 60 years than other workers.
The Age Pension access age currently sits at 65.5 years, and is progressively increasing to age 67 by July 2023.
40,000 employers now using Single Touch Payroll
Single Touch Payroll event reporting started on 1 July 2018 for medium and large employers, although many employers and payroll providers have obtained deferrals. Despite this, around 40,000 employers are already reporting tax and super information to the ATO when they pay their employees.
STP payroll event report is an important step in ensuring employers pay the right amount of super for their employees. It will also replace payment summaries (Group Certificates) and means that 2.5 million employees will see their tax and super information updated after every pay on their myGov account.
Legislation is currently before Parliament to extend STP to small employers from 1 July 2019. If this is passed, it will mean that all employers will be covered by STP reporting and this should also significantly improve the level of SG compliance by employers.
STP also includes a new online employee commencement process. This incorporates an online choice of fund form.
AIST has been actively involved in all aspects of STP design and implementation, and has insisted that the choice form includes both appropriate consumer protections and lists the employer’s relevant default fund for the employee.
Please contact AIST Senior Policy Manager David Haynes at firstname.lastname@example.org if you would like more information about STP.
Danielle Press and Sean Hughes appointed to ASIC
In his new role as Treasurer, Josh Frydenberg has appointed two former industry super figures to the Australian Securities and Investments Commission (ASIC).
Danielle Press and Sean Hughes were appointed to ASIC for a period of five years each by Mr Frydenberg.
Ms Press was the CEO of Equipsuper from 2010 to 2016, while Mr Hughes has previously acted as Chief Risk and Legal Officer at UniSuper. Both new appointees also have considerable backgrounds in the areas of law and governance for commercial and not-for-profit organisations.
In a press release announcing the new appointments, the government also flagged plans to strengthen both criminal and civil penalties for corporate misconduct.
More tools help funds with Insurance Code
A standardised template for a Key Fact Sheet (KFS) about the insurance offerings of funds has been completed by the Insurance Code of Practice transition committee.
The KFS has been posted on the AIST website along with instructions for trustees about how to customize it to reflect the automatic insurance cover of their fund.
The Insurance Code promotes better data standards and improved transparency arrangements to help members make informed decisions and to compare insurance offerings. The KFS is an important part of this process.
AIST member funds are continuing to develop transition plans for implementation of the Insurance Code of Practice ahead of the 31 December 2018 deadline. AIST, along with other code-owners and the transition committee, are providing ongoing assistance.
For further information about the Code please contact AIST Senior Policy Manager David Haynes at email@example.com
Download AIST’s latest toolkits on AFCA and investment language
AIST has added two new downloadable Toolkits to the suite of our Operational and Governance Toolkits available on our website.
The Transitioning to the Australian Financial Complaints Authority (AFCA) Toolkit is designed to assist funds with the transition to AFCA. It includes information on AFCA membership requirements, outstanding policy issues, fund resourcing and process changes, internal and external dispute resolution and disclosure obligations.
Our recently developed Investment Language Toolkit is also available from our website and is designed to enhance literacy around key investment concepts relating to superannuation fund investment portfolios.
Toolkits covering the following subjects are accessible for download from our website:
- Fit and Proper
- Insurance Management Framework
- Conflict Management Framework
- Investment Governance
- Business Continuity Management
- Website Disclosure
- Risk Management
- Investment Language
- Transitioning to the Australian Financial Complaints Authority
If you have any questions, or would like to provide feedback on the Toolkits, please contact Jake Sims, Policy & Regulatory Analyst on (03) 8677 3855 or at firstname.lastname@example.org
Does agri-investment meet members’ best interests?
The standing committee on agriculture and water resources inquiry into the suitability of superannuation funds to be able to invest in Australian agriculture has recently heard testimony from its first industry super fund during public hearings.
Prime Super CEO, Lachlan Baird appeared with Board Director, Duncan Fraser last month, providing evidence on barriers to agri-investment.
Mr Baird agreed with the Committee’s proposition that super funds are required to invest in the best interests of their members and that a direct investment in agribusiness is generally not consistent with that.
Mr Baird said investment into infrastructure surrounding agriculture was more suitable for super funds.
The Prime Super CEO also mentioned that pressure from regulators on underperformance was creating a need to achieve short term outcomes. “If you have an investment that doesn’t perform for a period of time, there is pressure to get out,” he said.
The Commission also explored the question of why it remains attractive for overseas funds to invest in Australian agriculture, but seemingly unattractive for Australian funds.
Other bodies to provide evidence to the Commission include Industry Super Australia, APRA and ASIC.
The committee’s terms of reference for the inquiry are to report on whether:
- There are any regulatory requirements imposed on superannuation funds by ASIC, APRA and any other relevant regulators, which are acting as a barrier to superannuation fund investment in Australian agriculture;
- The information required by the superannuation funds in order to invest in Australian agriculture is readily available, and if not, what statistical performance reporting of the agricultural sector is necessary; and
- There are any other practical barriers to superannuation fund investment in Australian agriculture.
Hearings are set to continue.
Ombudsman calls for super to invest in small businesses
The small business Ombudsman has called for super funds to invest in small business.
Citing the impact of the Financial Services Royal Commission that has seen retail banks tightening their lending practices, the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has targeted superannuation investment to boost growth in small to medium enterprise businesses.
Speaking on radio, Ms Carnell said the image of Small and Medium Enterprises is that they are riskier for lending, but that the reality is more complex.
“We’re not talking about start-ups here, we are talking about businesses with a bit of a track record, that have the capacity to grow. They can be in regional and rural areas, manufacturers, and even IT.”
In a statement, Ms Carnell outlined the case for a ‘Business Growth Fund’ based on UK and Canadian models.
“This business growth fund would offer both loans and investment, with SMEs applying for amounts between $250,000 and $5 million, with terms up to seven years, secured against the business.”
The Ombudsman has said she is open to the opportunity of discussing opportunities with Australia’s industry funds.