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Last week (27 May to 3 June) was National Reconciliation Week, a time for all Australians to learn about our shared histories, cultures and achievements, and to explore how we can contribute to achieving reconciliation in Australia. The 2019 theme wasGrounded in Truth: Walk together with Courage.
We acknowledge that there is a long way to go in improving the retirement outcomes of Aboriginal and Torres Strait Islander people, who face a number of issues regarding superannuation.
One such issue highlighted in our recent consultation response to Treasury, is that the law which specifies who can be a beneficiary of superannuation death benefits does not currently recognise cultural adoption and reflect Aboriginal and Torres Strait Islander kinship structures.
Our response supported broadening the definition of dependency to address this and urged Treasury to consult directly with the Aboriginal and Torres Strait Islander community to understand the issues they face in relation to superannuation and the best steps to address them.
We commend all of our members funds who are taking action to address the challenges faced by many Aboriginal and Torres Strait Islander people when accessing and engaging with their superannuation.
Examples include AustralianSuper who have been working with CAAMA (Central Australian Aboriginal Media Association), to produce a seven-part series discussing the basics of superannuation and insurance as they relate to Aboriginal and Torres Strait Islanders.
Hostplus have recently launched their Innovate Reconciliation Action Plan detailing the actions the fund will take over the coming 18 months to help close the gap between Indigenous and non-Indigenous Australians.
This is in addition to other AIST member funds who have Reconciliation Action Plans in place.
Furthermore, we are pleased that the ATO are continuing to expand how they help Indigenous Australians better understand the super system, find their lost super and consolidate multiple accounts.
AIST are looking forward to the next Indigenous Super Summit on the 6th of August to further explore how the industry can work with Aboriginal and Torres Strait Islanders to remove the barriers they face and to our continued involvement in the Big Super Day Out.
A report released by the First Nations Foundation has presented a clear outline of the challenges and aspirations of Indigenous Australians when it comes to money and the financial system.
The research revealed worrying statistics around financial security of Indigenous Australians with almost half of respondents saying they have high levels of financial stress.
Three-quarters responded saying they had difficulty getting help from financial services in the last 12 months, with reasons ranging from embarrassment and shame through to lack of financial literacy, services being too expensive or service being too slow.
On a positive note, 83% of people reported doing something to look after their money in the last 12 months, such as checking bank statements for wrong transactions, sticking to a budget, or saving money.
The research, conducted in partnership with NAB and the Centre for Social Impact, is aimed at assisting banks and financial services to understand how Aboriginal and Torres Strait Islander people think about money, and to generate solutions to improve service.
First Nations Foundation has used the report to stress an ongoing need for banks and other financial services to ensure their products and services are appropriate, affordable and accessible to Aboriginal and Torres Strait Islander people.
AIST member funds have expressed concerned about the problems associated with the “Protecting Your Super” legislation applying at a ‘product’ rather than an ‘account’ level.
An active member with multiple components in their accounts can have part of their transferred to the ATO if that part has a low balance and hasn’t received a contribution in the past 16 months.
AIST wrote to the recently re-appointed Federal Treasurer, Josh Frydenberg MP, earlier this week to ask that he address this issue by changing the law.
AIST will also be seeking that APRA ‘not apply compliance resources to review whether funds have applied the relevant tests at a product level’ (in the same way that ATO has in relation to inactive low balance accounts) pending resolution of this issue.
A total of 28 issues have been identified with the legislation. While AIST supports its policy intent, we are keenly aware of fund implementation issues, and are also consulting with Treasury and the regulators about these issues.
AIST has consulted with member funds about this issue and thanks them for the significant assistance and support provided.
The processes involved with the appointment of the re-elected Government has delayed the consultation process, but now the ministries are in place, this is being progressed by AIST as a high priority.
The Federal Opposition has announced their new shadow ministry with some notable changes to its treasury and finance department.
Dr Jim Chalmers has been appointed Shadow Treasurer, replacing Chris Bowen. Chalmers name was included with a number of potential Labor party leaders prior to Anthony Albanese taking the role as Opposition leader.
Superannuation will be handled by NSW MP, Stephen Jones, who was appointed Assistant Treasurer & Minister for Financial Services. Matt Thistlewaite was also reappointed as Assistant Minister for Financial Services.
AIST CEO Eva Scheerlinck noted the contributions of outgoing Shadow Treasurer Chris Bowen, and outgoing Shadow Financial Services Minister, Clair O’Neil for their contributions to the superannuation sector and their openness and willingness to engage with the profit-to-member superannuation industry.
Additional appointments relevant to the profit-to-member super sector include:
The Insurance in Super Code Owners (AIST, ASFA and FSC) have agreed to wait to see whether the Government makes any changes to the ‘Protecting Your Super’ Act or intends to re-introduce the ‘Putting Members’ Interests First’ Bill – both of which impact on insurance – before making changes to the Code.
Since the commencement of the Code in 2018, legislation has passed which has resulted in some sections of the Code being inconsistent with the law.
A delay in revising the Code will help Code owners to best reflect changes to the law. During this time there is no obligation for Code adoptees to comply with those sections of the Code that are inconsistent with the law.
TheTreasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 provides for default insurance cover to be no longer provided to fund members once their account has been inactive for a period of up to 16 continuous months or more. This requirement commences on 1 July 2019.
The Code Owners will be changing the inactivity period in the Code from 13 months to up to 16 months to reflect this.
There are related communication requirements to members with inactive accounts contained in theTreasury Laws Amendment (Protecting Your Superannuation Package) Regulations 2019.
The Code Owners recognise that this means that the Code requirements to communicate about a lack of contributions and to automatically cease cover for a lack of contributions will need to be amended.
However, the Code Owners have taken the view that further time needs to be taken before making any changes to the Code. It is possible that further legislative changes will be passed, either to amend the recent Act or to introduce theTreasury Laws Amendment (Putting Members' Interests First) Bill.
Before making changes to the Code, the Code Owners require clarification about whether these further legislative changes will be made, and if so, their impact on the Code.
Rather than making changes to the Code on a piecemeal basis, it is more appropriate and less confusing for consumers for the Code to be amended to align with all aspects of the relevant legislation. This will reduce the risk of trustees being required to implement several iterations of systems and process changes, and provide confidence that the Code reflects the law.
In the meantime, trustees that have already transitioned to the Code will refrain from complying with the sections that are in conflict with the law from 1 July 2019, and will note this alteration of their Code commitments in their published transition plans and Code compliance reports.
A class action against Suncorp Group’s superannuation funds will argue that up to 170,000 members were wrongfully charged trailing commissions in the lead up to FOFA bans on conflicted remuneration.
The action will allege Suncorp deliberately exploited grandfathering provisions that would allow it to continue paying trailing commissions to its financial advisers.
$180 million is the figure estimated by Suncorp themselves in relation to the commissions, with lawyers also seeking lost interest on top of this.
The class action alleges the retail fund breached its duties to avoid conflicts, act with due care and diligence and act in the best interest of its members.
The case was examined during the Financial Services Royal Commission hearings on superannuation.
Referring to the case in his final report, commissioner Kenneth Hayne said it was difficult to understand how allowing for grandfathered commissions to be maintained was in members’ best interests.
“It is not clear what benefits, if any, were to flow to members as a result of the amendments. On the limited material available, it is not clear that members’ interests were even considered when the decision was made," he said.
Funds and organisations that offer retirement calculator tools to their members will have greater flexibility around how they factor inflation into their calculation models.
The Australian Securities and Investments Commission (ASIC) has released an amendment to ASIC Corporations (Generic Calculators) Instrument 2016/207.
The amendment ensures that estimates produced by superannuation and retirement calculators are adjusted for inflation. The new requirements will commence on 5 December 2019 (extended from 1 July 2019), giving calculator providers with a transition period of six months.
The amendment also provides superannuation and retirement calculator providers with an option to use within financial calculators either an assumed default inflation rate of 3.2% or an alternative assumed inflation rate so long as certain disclosure requirements are met.
The default inflation rate is used by ASIC’s MoneySmart superannuation and retirement calculators and includes a component reflecting changes in the cost of meeting increases in community living standards. The default inflation rate will be adjusted in June each year.
The assumed inflation rate was previously 2.5% (being the mid-point of the Reserve Bank of Australia's target rate for inflation over the cycle).
The disclosure requirements include that if the estimate provided is of an amount payable at a future time of 2 or more years, there must be a clear and prominent statement setting out the present value of the estimate.
If an assumed inflation rate is used which does not include a component reflecting the cost of meeting community living standard increases, then there must be a clear and prominent statement to this effect as well as explaining the implications.
06 June 2019