Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
Superannuation legislation amendment (mysuper core provisions) bill 2012
REVISED EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Employment and Workplace
Relations and Minister for Financial Services and Superannuation, the Hon
Bill Shorten MP)
THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF
REPRESENTATIVES TO THE BILL AS INTRODUCED
Table of contents
Glossary v
General outline and financial impact vii
Chapter 1 Overview of MySuper 1
Chapter 2 Default contributions must be placed in MySuper products 7
Chapter 3 Authorisation of MySuper products 11
Chapter 4 Characteristics of MySuper products 27
Chapter 5 Permitted fees for MySuper products 35
Chapter 6 Fee charging rules for MySuper products 41
Index 47
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Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|APRA |Australian Prudential |
| |Regulation Authority |
|ASIC |Australian Securities and |
| |Investments Commission |
|Bill |Superannuation Legislation |
| |Amendment (MySuper Core |
| |Provisions) Bill 2012 |
|Corporations Act |Corporations Act 2001 |
|RIS |regulation impact statement |
|RSE |registrable superannuation |
| |entity |
|SG Act |Superannuation Guarantee |
| |(Administration) Act 1992 |
|SIS Act |Superannuation Industry |
| |(Supervision) Act 1993 |
|SIS Regulations |Superannuation Industry |
| |(Supervision) Regulations |
| |1994 |
General outline and financial impact
Stronger Super
On 16 December 2010, the Assistant Treasurer and Minister for Financial
Services and Superannuation, the Hon Bill Shorten MP, announced the
Stronger Super reforms.
Stronger Super represents the Government's response to the review of the
governance, efficiency, structure and operation of Australia's
superannuation system, the Super System Review. The Government released
the Super System Review's final report on 5 July 2010.
To provide input on the design and implementation of the Stronger Super
reforms, the Government undertook extensive consultations with industry,
employer and consumer groups. The Government announced its decisions on
the key design aspects of the Stronger Super reforms on 21 September 2011.
The reforms include MySuper, a new, simple and cost-effective
superannuation product that will replace existing default products.
MySuper products will have a simple set of product features, irrespective
of who provides them. This will enable members, employers and market
analysts to compare funds more easily based on a few key differences. It
will also ensure members do not pay for any unnecessary 'bells and
whistles' they do not need or use.
The Superannuation Legislation Amendment (MySuper Core Provisions) Bill
2012 (the Bill) implements some of the key aspects of the Stronger Super
reforms relating to MySuper.
To this end, the Bill:
defines a MySuper product;
limits a regulated superannuation fund to offering only one MySuper
product, except in certain circumstances;
allows registrable superannuation entity (RSE) licensees to apply to the
Australian Prudential Regulation Authority (APRA) for authorisation to
offer a MySuper product;
sets out rules on the payment of contributions and account transfers for
MySuper products; and
sets out the fees that can be charged and the basis on which those fees can
be charged to members of a MySuper product.
Date of effect: The provisions amending the Superannuation Industry
(Supervision) Act 1993 (SIS Act) commence on 1 January 2013 or an earlier
day fixed by Proclamation. The provision amending the Superannuation
Guarantee (Administration) Act 1992 (SG Act) commences on 1 January 2014,
from which date employers must make contributions for employees that do not
have a chosen fund to a fund that offers a MySuper product.
Proposal announced: On 16 December 2010, the Assistant Treasurer and
Minister for Financial Services and Superannuation, the
Hon Bill Shorten MP, announced the Stronger Super reforms. On
21 September 2011, he announced the Government's decisions on the key
design aspects of the Stronger Super reforms.
Financial impact: This Bill has no significant financial impact on
Commonwealth expenditure or revenue.
Summary of regulation impact statement
Impact: The regulation impact statement (RIS) for Stronger Super
implementation can be found at http://ris.finance.gov.au. The relevant
sections of the RIS covered in this Bill are lifecycle investment options,
multiple brands and permitted fees in MySuper products. A RIS exemption
was granted for the authorisation of large employer tailored MySuper
products. This and other elements of this Bill will be subject to a post-
implementation review.
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Outline of chapter
1. This chapter outlines the rationale for MySuper products, the core
framework for MySuper products contained in this Bill and measures
to be contained in subsequent tranches of legislation.
Context
2. Superannuation is a key pillar of Australia's retirement income
system. For many Australians it will be their only substantial
source of private saving for retirement, apart from the family
home.
3. The importance of the superannuation system to the retirement
incomes of Australians means there is a strong public interest in
ensuring it operates effectively to invest retirement savings with
the ultimate goal of providing adequate benefits to members in
their retirement.
4. Despite this, there is evidence that many Australians do not take
an active interest in managing their superannuation. Around 60 per
cent of members do not make active choices in relation to their
superannuation.
5. For many employees, retirement is considered remote and they may
not have the time, interest or expertise to engage with their
superannuation. Some employees fear they may make the wrong
choice, so will adopt the default option offered through their
employer.
6. Superannuation is also a complex financial product. Therefore, it
is currently difficult for ordinary Australians to make comparisons
of superannuation products. There is also a wide array of choices
that can overwhelm and discourage individuals from protecting their
own interests.
7. It is clear that the superannuation system already adequately
caters for those who wish to make choices about their retirement
savings. Importantly, MySuper products will not reduce the level
of choice that is available within superannuation. For individuals
that wish to choose an alternative product they will be free to do
so.
8. The introduction of MySuper products will improve the experience of
those members that accept the default option by placing them in a
product that is appropriate and ensures their financial interests
are protected.
9. First, MySuper will lift the standards that apply to default
superannuation funds. RSE licensees will have a heightened
obligation to act in the best financial interests of members that
accept the default option. RSE licensees will also need to
actively consider whether their MySuper product has access to
sufficient scale to provide net returns that are in the best
financial interests of members. MySuper products will also be
appropriate for members that do not require or generally do not
request additional services. Importantly, MySuper products will
not allow commissions to be paid from the product.
10. Second, MySuper will simplify and standardise the default
superannuation product available to Australians. Funds will be
limited in the number of MySuper products that they will be able to
offer. This will make comparisons more manageable by having a well-
known and distinct cohort of MySuper products.
11. MySuper products will also have common characteristics meaning that
they will be able to be compared based on a few key differences -
cost, investment performance and the level of insurance coverage.
MySuper products will be restricted to charging fees that are
described in the same way so that they can be directly compared.
Members of a particular MySuper product will also be generally
charged the same fees, except in limited circumstances. This will
enable members, employers and market analysts to make comparisons
across MySuper products based on the actual fees paid and
investment returns received by members. In addition, APRA will
collect and publish data on MySuper products to ensure they are
transparent and comparable.
Core framework for MySuper products
12. This Bill establishes the core framework for MySuper products.
13. The Bill establishes a process for APRA to authorise RSE licensees
to offer a MySuper product. Authorisation is important as only
MySuper products will be able to accept superannuation guarantee
contributions made by or on behalf of members who do not have a
chosen fund or have not elected in writing to have contributions
paid to a specified choice product or products. The Bill also
provides for circumstances where an RSE licensee will be able to
apply for authorisation for more than one MySuper product per fund.
14. The Bill also provides that a MySuper product must meet core
criteria. These include that for each MySuper product:
. there is a single diversified or lifecycle investment
strategy;
. all members have access to the same options and
facilities;
. the same processes are adopted in crediting or debiting
member accounts;
. the only limits placed on the source or kind of
contributions to a MySuper product are those prescribed by
regulations or imposed under the general law or a law of
the Commonwealth;
. a member's interest cannot be transferred without the
member's consent except as required or permitted under a
law of the Commonwealth;
. the MySuper product is only for the pre-retirement phase;
. only permitted fees can be deducted from member accounts;
and
. the permitted fees are the same for all members in the
MySuper product, with the exception of the administration
fee.
Measures to be contained in subsequent tranches of legislation
15. The Stronger Super reforms will be implemented in several tranches
of legislation.
16. MySuper provisions that are not contained in this Bill and will be
addressed by the subsequent tranches of legislation are:
. specific trustee duties in relation to a MySuper product
including:
- to manage the MySuper product at an overall cost aimed
at optimising the best financial interests of members,
as reflected in the net return over the long term;
- to clearly articulate an investment return target (over
a rolling 10-year period) and level of risk appropriate
to members of the MySuper product; and
- to actively examine and conclude whether the MySuper
product has access to sufficient scale (with respect to
both assets and number of members) to continue to
provide net returns that are in the best financial
interests of members.
. trustee duties for eligible rollover fund licensees that
are similar to the specific trustee duties in relation to
MySuper products;
. the power for APRA to make prudential standards in
relation to superannuation and issue directions to RSE
licensees;
. allowing defined benefit funds and schemes to continue to
be a default superannuation product;
. rules for the charging of financial advice deducted from
member accounts and charging for intra-fund advice;
. prohibition on deduction of commissions from member
accounts;
. rules for the payment of performance-based fees by RSE
licensees to investment managers in relation to the assets
of a MySuper product;
. trustee obligations in respect of insurance;
. limitation of certain fees to cost-recovery;
. a rule for the fair and reasonable allocation of costs
between each MySuper product and each choice product
within a fund;
. enhanced data collection and data publication powers for
APRA;
. specific disclosure requirements in relation to MySuper
products, including a product dashboard;
. consequential amendments to deal with the nomination of
superannuation funds in modern awards and enterprise
agreements;
. consequential amendments to the Corporations Act 2001
(Corporations Act) that ensure the necessary obligations
of that Act apply to MySuper products; and
. arrangements for the transition of member accounts from
existing default superannuation products to MySuper
products.
Default contributions must be placed in MySuper products
Outline of chapter
1. This chapter explains the new obligations for employers and RSE
licensees that will ensure MySuper products will be the default
superannuation product for all employees that have not chosen a
fund or choice product within a fund.
Summary
Process by which default contributions must be placed in MySuper products
2. A two-step process will ensure that all superannuation guarantee
contributions made by employers on behalf of employees that do not
have a chosen fund and have not elected in writing to the RSE
licensee to have their contributions made to a specified choice
product will be paid into a MySuper product.
3. First, employers must make superannuation guarantee contributions
on behalf of employees that do not have a chosen fund to a
superannuation fund that offers a MySuper product.
4. This will be a minimal change to employers' current obligations.
For most employers, it is expected their existing default
superannuation fund will offer a MySuper product so they will not
have to change their arrangements for making superannuation
guarantee contributions. New employers, and employers making
contributions to a fund that does not offer a MySuper product, will
have to select a default fund that offers a MySuper product.
5. It is intended that APRA will publish on its website a list of all
funds that are authorised to offer a MySuper product.
6. Second, all RSE licensees will have an obligation to pay the
contributions of members to a MySuper product unless a member has
elected, in writing, for contributions made on their behalf to be
paid to a specified choice product or products.
Exemption for defined benefit funds
7. Currently, superannuation guarantee contributions made in relation
to an employee's interest in a defined benefit fund or scheme do
not have to comply with the choice of fund requirements. This will
not be changed.
8. Later tranches of legislation will include an exemption to the
obligation on RSE licensees to pay contributions to a MySuper
product for contributions that relate to a member's entitlement to
a defined benefit. Further, it is intended that where an employer
fully meets their superannuation guarantee obligation with a
notional benefit certificate from a defined benefit fund or scheme
then they will be able to make additional contributions that the
RSE licensee will not have to pay to a MySuper product. That is,
those additional contributions could be paid to a choice product.
Detailed explanation of new law
9. Employers will have to make contributions on behalf of employees
that do not have a chosen fund to a fund that is authorised by APRA
to offer a MySuper product. [Schedule 1, item 1, paragraph
32C(2)(c)]
10. The current subsection 32C(2) of the SG Act outlines how an
employer must meet their choice of fund requirements for
superannuation guarantee contributions that are on behalf of
employees that do not have a chosen fund. One of the existing
requirements is that the employer contributes to a fund that
complies with the regulations in relation to offering insurance in
respect of death. This requirement will not be changed; however,
rules on insurance for MySuper and choice products will be included
in later tranches of legislation. [Schedule 1, item 1,
paragraph 32C(2)(c)]
11. RSE licensees will be required to pay the contributions of all
members into a MySuper product that they offer unless the member
elects in writing that the contribution is to be paid into a
specified choice product or more than one specified choice product.
A member may elect in writing by completing an online form or
selecting a check box on a written form. An election made in
writing continues to remain in effect until a contrary election is
made by the member. If a member made an election to have
contributions paid to a specified product prior to the commencement
of these provisions then that election will allow for contributions
to continue to be paid into that product. [Schedule 1, item 9,
division 6, section 29WA]
12. Employees that have a chosen fund may have superannuation guarantee
contributions made to a fund whose trustee is not authorised to
offer a MySuper product. A trustee of this type of fund will not
be able to pay these contributions into a choice product in their
fund until the employee has elected in writing to have the
contributions paid into a specified choice product. [Schedule 1,
item 9, division 6, section 29WA]
13. RSE licensees that offer more than one MySuper product will be able
to pay contributions to any of those MySuper products to satisfy
this obligation subject to any governing rules of the fund that
require contributions to be placed in a given MySuper product. It
will also be possible for a member to elect to have part of their
contributions made to the MySuper product and part of their
contributions to a choice product in the fund if they elect in
writing. [Schedule 1, item 9, division 6, section 29WA]
14. Contravention of the requirement noted in paragraph 2.11 will be an
offence of strict liability. A penalty of 50 penalty units will
apply. A strict liability offence is necessary as the consequences
of an RSE licensee contravening this requirement could have a
detrimental impact on the retirement savings of the employees
affected. It is a reasonable expectation that RSE licensees have
appropriate administrative processes in place to ensure that
contributions are placed in either the MySuper product, or in a
choice product where a member has made an election in writing.
[Schedule 1, item 9, division 6, section 29WA]
15. Later tranches of legislation will clarify that this offence will
not apply to RSE licensees of funds that only provide defined
benefits or to other RSE licensees in respect of contributions that
are made to a defined benefit fund or scheme.
Application and transitional provisions
16. These provisions will apply from 1 January 2014. [Schedule 1, item
13]
17. Transitional arrangements will allow employers to make
contributions on behalf of employees that do not have a chosen fund
to a fund that operates an existing product for the benefit of that
employer that is the subject of an application, made prior to 1
July 2013, for a MySuper product for a large employer. RSE
licensees will be able to pay these contributions to the existing
product for which an application has been made prior to 1 July 2013
until APRA has decided that application. [Schedule 1, item 12]
18. Should APRA refuse an application made prior to 1 July 2013 for
authorisation of an existing employer plan as a MySuper product,
employers will have a three month grace period in which they will
be able to continue to make contributions to that fund and ensure
that they can continue to satisfy their obligations to pay these
contributions to a fund that offers a MySuper product. Within the
three month grace period, RSE licensees will also be able to place
contributions from that employer into the existing employer plan
that APRA has refused an application for a MySuper product.
[Schedule 1, item 12, subsections (5) and (6)]
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Outline of chapter
1. This chapter explains the process by which RSE licensees will be
authorised to offer MySuper products and an associated offence for
a person misrepresenting that a fund offers a MySuper product when
they are not authorised by APRA.
Summary
Application process
2. APRA will be able to accept applications for authorisation to offer
a MySuper product from any RSE licensee that wishes to offer a
MySuper product. RSE licensees will need to apply for
authorisation for each MySuper product they wish to offer.
However, APRA cannot authorise a MySuper product for a fund that
has fewer than five members or is an eligible rollover fund. This
excludes trustees of self-managed superannuation funds and small
APRA-regulated funds from being able to offer MySuper products.
Pooled superannuation trusts and approved deposit funds cannot
accept superannuation guarantee obligations, so will also not be
able to offer a MySuper product.
3. Applications are required to:
0. be in an approved form;
0. contain the information required on the approved form;
0. state the RSE licensee's and the superannuation fund's
Australian Business Numbers (ABN); and
0. be accompanied by an up-to-date copy of the trust deed and
governing rules of the fund.
4. APRA may provide a notice requesting additional information from an
RSE licensee that has applied for authorisation to offer a MySuper
product.
Period for deciding applications
5. APRA must decide an application to offer a MySuper product within
60 days of receiving an application by the fund. This is the same
period that is allowed for a decision on an application for an RSE
licence.
6. Should APRA request an RSE licensee to provide additional
information in relation to its application, APRA will have a
further 60 days from when it receives this information in which to
decide the application.
7. APRA may extend the period for making a decision on an application
to offer a MySuper product by an RSE licensee by a further 60 days,
providing it notifies the RSE licensee in writing of its intention.
This also includes cases where RSE licensees are requested by APRA
to provide additional information. Should APRA not have made a
decision within the extended time period, the application is deemed
to be refused by APRA and the RSE licensee is not authorised to
offer the MySuper product.
Authority
8. Authorisation will allow an RSE licensee to accept contributions
for the benefit of employees who do not have a chosen fund.
9. APRA will authorise an RSE licensee to offer a MySuper product if
it is satisfied that:
the proposed product complies with the MySuper characteristics (explained
in Chapter 4 of this Explanatory Memorandum);
the RSE licensee is likely to comply with the MySuper fee rules (explained
in Chapters 5 and 6 of this Explanatory Memorandum); and
the RSE licensee is likely to comply with the enhanced trustee obligations
(to be contained in a later tranche of legislation).
10. APRA must refuse an RSE licensee's application for authorisation
for a MySuper product if it is not satisfied of any of the elements
in paragraph 3.9. APRA's decision to refuse an application is a
reviewable decision.
11. Generally, an RSE licensee will only be authorised to offer one
'generic' MySuper product in a fund. In limited circumstances, RSE
licensees may apply for authorisation to offer additional MySuper
products that must satisfy additional requirements described in
paragraphs 3.12 to 3.14.
Product in another fund in which there is already material goodwill
12. An RSE licensee can apply for authorisation for a 'separately
branded' MySuper product where there is already goodwill in that
product prior to it being transferred to the fund.
13. APRA will have discretion to approve RSE licensees to offer more
than one MySuper product within a fund in order to preserve a pre-
existing brand being transferred to the fund where goodwill could
not be maintained unless the RSE licensee was authorised to offer
the additional MySuper product in the fund. This will ensure that
funds are not precluded from deriving any administrative or other
efficiencies from operating more than one MySuper product within a
fund. Limiting authorisation of a separately branded MySuper
product to cases of transfers will ensure that there is not a
proliferation in MySuper products being offered within a single
fund.
MySuper products for large employers
14. An RSE licensee may apply to APRA for authorisation of a 'tailored'
MySuper product that is established for a large employer and its
associates that contribute to the fund on behalf of least 500
members who are either employees of the large employer or
associates of that large employer. This will enable RSE licensees
to offer a tailored MySuper product to large employers where it is
viable to offer a distinct product to suit the particular needs of
the workplace.
Cancellation of authority
15. APRA will be able to cancel the authorisation to offer a MySuper
product if:
0. it is not satisfied that the MySuper product continues to
meet the criteria for a MySuper product;
0. an RSE licensee was authorised to offer a tailored MySuper
product to a large employer and its associates that
contribute to the fund for at least 500 members and this
criteria is not met in respect of that tailored MySuper
product at the end of its annual reporting period;
0. an RSE licensee was authorised to offer a tailored MySuper
product on the expectation that a large employer and its
associates would contribute to the fund for at least
500 members and this criteria is not satisfied at the end
of the period specified by APRA in the authority;
0. it is no longer satisfied that the RSE licensee is likely
to comply with the enhanced trustee obligations or fee
rules;
0. it ceases to be satisfied that the RSE licensee is not
likely to represent a product as a MySuper product when
they are not authorised to do so;
0. it ceases to be satisfied that the RSE licensee will pay
to a MySuper product the contributions of members who have
not elected in writing to have contributions paid to a
specified choice product;
0. the fund ceases to have five or more members;
0. an RSE licensee was authorised to offer a MySuper product
on the expectation that the fund would have five or more
members and this criteria is not met by the end of a
period specified by APRA;
0. it ceases to be satisfied that the fund is not an eligible
rollover fund; or
0. it is satisfied that the RSE licensee or one of the
individual trustees of an RSE licensee has contravened a
provision of the governing rules of the fund relating to
the MySuper product.
16. Later tranches of legislation may also enable APRA to cancel
authorisation to offer a MySuper product if an RSE licensee
contravenes any of the rules to be contained in those tranches of
legislation. For example, rules relating to enhanced trustee
obligations, insurance or disclosure requirements.
Offence for offering a MySuper product without being authorised
17. A person cannot make representations that a product in a fund is a
MySuper product unless the fund is authorised by APRA to offer that
product as a MySuper product. A breach of this provision is an
offence of strict liability and subject to a penalty of 60 penalty
units.
Detailed explanation of new law
Definition of MySuper product
18. A MySuper product is defined as a class of beneficial interest if
the RSE licensee has been authorised by APRA to offer that class of
beneficial interest in the fund as a MySuper product in that fund.
This definition is not intended to imply that a MySuper product is
a separate financial product under the Corporations Act. The class
of beneficial interest is simply the rights and obligations that
attach to that part of the member's interest in the superannuation
fund. It most cases, the interest in the superannuation fund will
be the relevant financial product. [Schedule 1, item 6, subsection
10(1))]
19. A class of beneficial interest in a fund that is not a MySuper
product is defined as a choice product. [Schedule 1, item 4,
subsection 10(1)]
Application process
20. APRA will be able to accept applications for authorisation to offer
a MySuper product in a fund from any RSE licensee who wishes to
offer a MySuper product. RSE licensees will need to apply for
authorisation for each MySuper product they wish to offer. During
2012, APRA will provide guidance that will outline the information
expected to be provided in an RSE licensee's application.
[Schedule 1, item 9, division 2, subsection 29S(1))]
21. However, APRA cannot authorise a MySuper product for a fund with
fewer than five members. This will exclude self managed
superannuation funds and small APRA-regulated funds from being able
to offer a MySuper product. The existing choice of fund
requirements in the SG Act will prevent pooled superannuation
trusts and approved deposit funds from accepting contributions and
hence these will not be able to offer a MySuper product. [Schedule
1, item 9, division 3, paragraph 29T(1)(d)]
22. To ensure that APRA is provided with detailed, relevant information
to be able to adequately assess applications from RSE licensees,
information must be provided in the approved form. This includes
the RSE licensee's and the fund's ABN, as well as an up-to-date
copy of the trust deed and governing rules of the fund. [Schedule
1, item 9, division 2, subsection 29S(2)]
23.
24. When an RSE licensee provides APRA with a copy of the trust deed
and governing rules of the fund as part of its application, these
are to already contain the amendments required for the fund to be
able to offer a MySuper product. This will ensure that APRA has
all of the information that it requires when assessing an RSE
licensee's application to be able to offer a MySuper product.
[Schedule 1, item 9, division 2, subsection 29S(2)]
25. If any of the information provided in an application ceases to be
correct or the trust deed or governing rules of the fund have been
varied between when the application was submitted to APRA and
before APRA has made a decision, the RSE licensee will be required
to provide APRA with the correct information or the amended
governing rules or trust deed as soon as practicable. [Schedule 1,
item 9, division 2, subsections 29S(3), (4) and (5)]
26. APRA may request an RSE licensee to provide additional information
before making a decision on the application. This may occur if the
information provided by an RSE licensee was insufficient to enable
APRA to make a decision. [Schedule 1, item 9, division 2, section
29SA]
Time period for deciding applications
27. APRA must decide an application for authorisation to offer a
MySuper product within 60 days of receiving an application by an
RSE licensee. Given the extensive information required to be
assessed by APRA, it is important that it be given an appropriate
period of time to be able to assess each application. [Schedule 1,
item 9, division 2, paragraph 29SB(1)(a))]
28. However, APRA may request additional information and the initial 60
day period will restart once the RSE licensee has provided the
requested information. Any delay by the RSE licensee in providing
the requested information delays the day by which APRA must make a
decision. This is the same arrangement that applies for requests
for additional information in respect of RSE licence applications.
[Schedule 1, item 9, division 2, paragraph 29SB(1)(b)]
29. APRA may extend the period for deciding an application for
authority for an RSE licensee to offer a MySuper product, provided
it notifies the RSE licensee in writing, within the initial 60 day
period. APRA may only extend the initial 60 day period once.
[Schedule 1, item 9, division 2, subsections 29SB(2) and (3)]
30. To ensure that APRA has sufficient time in which to approve
applications from RSE licensees wishing to offer a generic MySuper
product before 1 July 2013, APRA will be provided with additional
time to process applications for tailored MySuper products made
before 1 July 2013. APRA will have 120 days in which to consider
these applications with the option of extending that period by a
further 60 days. This period will commence on 1 July 2013 if the
application is made prior to that date. RSE licensees will not be
required to place member contributions from employers being
considered for a tailored MySuper product into a MySuper product
until APRA has made a decision on the application. Any application
received by APRA after 1 July 2013 will mean that APRA does not
have the extended period to make a decision but also means the RSE
licensee will not have the transitional arrangements to continue to
pay contributions to that product after 1 January 2014 until a
decision is made by APRA. [Schedule 1, item 12, subsections (1) -
(4)]
31. Where APRA has not decided on an application for authority by then
end of the required period, APRA is taken to have refused the
application. This is the same process that occurs should APRA not
have decided on an application for an RSE licence within the
required time. RSE licensees are not to offer MySuper products
unless they have been authorised by APRA. [Schedule 1, item 9,
division 2, subsection 29SB(4)]
Authorisation process
32. APRA must authorise an RSE licensee to offer a MySuper product if:
0. the application is in the approved form;
0. the RSE licensee provides all of the information required
by APRA to approve the authority;
0. the fund is registered, has five or more members (or is
expected to have five or more members within a time period
specified by APRA) and is not an eligible rollover fund;
0. the proposed product will be the only MySuper product in
the fund unless it meets one of the criteria explained in
paragraph 3.33;
0. it is satisfied the governing rules require that the
product meets the characteristics of a MySuper product;
0. it is satisfied that the RSE licensee is likely to comply
with the fee charging rules in relation to MySuper
products;
0. it is satisfied that the RSE licensee is likely to comply
with the enhanced trustee obligations explained in
paragraph 3.32;
0. it is satisfied that the RSE licensee is not likely to
represent a product as a MySuper product when they are not
authorised to do so; and
0. it is satisfied that the RSE licensee is not likely to
place contributions of a member that does not have a
chosen product into a product that is not a MySuper
product.
[Schedule 1, item 9, division 3, subsection 29T(1)]
33. The enhanced trustee obligations in relation to MySuper products
will be defined in subsequent tranches of legislation, including:
0. to manage the MySuper product at an overall cost aimed at
optimising the best financial interests of members, as
reflected in the net return over the long term;
0. to clearly articulate an investment return target (over a
rolling 10-year period) and level of risk appropriate to
members of the MySuper product; and
0. actively examine and conclude whether the MySuper product
has access to sufficient scale (with respect to both
assets and number of members) to continue to provide net
returns that are in the best financial interests of
members. [Schedule 1, item 9, division 3, paragraph
29T(1)(g)]
34. In addition to the criteria noted in paragraph 3.31, an RSE
licensee may offer more than one MySuper product in a fund if one
of the following criteria is met:
0. the RSE licensee is already authorised to offer a generic
MySuper product in the fund, however, the proposed MySuper
product satisfies either the goodwill or large employer
requirements;
0. the RSE licensee is seeking to apply for authorisation of
a generic MySuper product and is already authorised to
offer one or more MySuper products in the fund but each of
those authorised products would satisfy either of the
goodwill or large employer requirements.
[Schedule 1, item 9, division 3, paragraph 29T(1)(f)]
35. If APRA is satisfied that all of the requirements noted in
paragraph 3.31 are satisfied, it must authorise an RSE licensee to
offer that MySuper product. It must notify the RSE licensee in
writing that their application has been approved. [Schedule 1,
item 9, division 3, sections 29T and 29TD]
36. RSE licensees may only offer MySuper products from 1 July 2013.
Should an RSE licensee be authorised to offer a MySuper product
before this date, the authority will not take effect until
1 July 2013. [Schedule 1, item 11]
37. An RSE licensee that receives authority from APRA to offer one or
more MySuper products must only offer an authorised product and no
other product as a MySuper product in the fund or in another fund
operated by the RSE licensee. RSE licensees are required to be
authorised by APRA for each MySuper product they wish to offer.
[Schedule 1, item 9, division 6, section 29W]
38. If the requirements noted in paragraph 3.31 are not satisfied, then
APRA is required to refuse an application to offer a MySuper
product. [Schedule 1, item 9, division 3, subsection 29T(2)]
39. APRA must notify an RSE licensee in writing whether their product
has been authorised or refused authorisation. In the event that
authorisation is refused, APRA must provide the RSE licensee with
reasons as soon as practicable after the decision is made.
[Schedule 1, item 9, division 3, sections 29TD and 29TE)]
40. Should APRA refuse an application from an RSE licensee for
authorisation to offer a MySuper product, this will be a reviewable
decision. [Schedule 1, item 7, paragraph 10(1)(doa)]
41. Additional standard licence conditions will exist for all RSE
licensees that are authorised to offer a MySuper product. The RSE
licensee must ensure the governing rules of the fund are not
changed such that the MySuper product no longer satisfies the
characteristics required for a MySuper product. The RSE licensee
must also ensure they do not contravene any of the governing rules
of the fund in relation to the MySuper product. [Schedule 1, item
8, subsection 29E(6A)]
Product in another fund in which there is already material goodwill
42. An exception will allow RSE licensees to apply to APRA for
authorisation to be able to offer more than one MySuper product per
fund in order to preserve a corporate brand if APRA is satisfied of
several factors:
0. the new proposed MySuper product is similar to the product
from the original fund from which members are being
transferred, for example with respect to the investment
strategy, insurance and fees. The product must be
maintained to ensure that it is sufficiently similar so
that the goodwill in that product will continue (goodwill
is an intangible asset which is already a well understood
concept). If the product was changed significantly, this
would remove the justification for a separately branded
MySuper product;
0. there is material goodwill in the product of the original
fund and that goodwill could not be maintained unless the
RSE licensee is authorised to offer the proposed new
MySuper product; and
0. it would be in the best interest of all members of the
fund to maintain the distinction between the proposed
MySuper product and the existing MySuper product already
authorised. [Schedule 1, item 9, division 3, section
29TA]
43. For the avoidance of doubt, this Bill will not prevent RSE
licensees from having more than one product disclosure statement
for a MySuper product. This includes using employer names to label
a MySuper product or using an RSE licensee's different brand names
to label a MySuper product. However, this does not permit any
variation in the features of the underlying product that is offered
under a different label. Therefore, for example, two members that
enter a MySuper product under different labels will have the same
investment strategy and will be charged the same fee structure.
44. Where an RSE licensee labels or badges a MySuper product they must
continue to meet the obligations of Part 7.10 of the Corporations
Act. Therefore, to ensure that product disclosure statement
documentation is not misleading, the name of the underlying MySuper
product should be clearly stated.
MySuper authorisation for large employers
45. RSE licensees will be able to apply to APRA for authorisation to
offer a tailored MySuper product to large employers for their
employees. As a matter of practice, APRA may not accept
applications from RSE licensees for authorisation of a tailored
MySuper product until there is evidence of an employer's intention
to contribute to the fund. Therefore, an RSE licensee
participating in a tender process should not submit an application
until they have been selected by that process and have evidence
supporting this, for example a letter of intent or an executed
contract. [Schedule 1, item 9, division 3, section 29TB]
46. A tailored MySuper product could be fundamentally different to a
fund's generic MySuper product, including with respect to its
investment strategy, services and fees. Therefore, separate
authorisation of tailored MySuper products provides certainty to
employers and their employees that the product meets all of the
relevant legislative criteria and will not be disallowed by APRA
after it has been put in place and started to receive
contributions.
47. However, recognising that tailored MySuper products are likely to
often be based on a fund's generic MySuper product, or previously
authorised tailored products, APRA will only assess tailored
MySuper products for any differences from a MySuper product that
has already been authorised. Therefore, where there are few
differences in a tailored MySuper product, it can be expected the
authorisation process will be quicker and require less effort by
the RSE licensee.
48. This approach to the authorisation process aims to ensure there are
no unnecessary constraints on employers who may wish to consider
switching their default fund by conducting an open tender process.
49. The Treasury will conduct a review of the authorisation process
within two years of the commencement of the MySuper regime on 1
July 2013 to assess the efficiency of the authorisation process.
The review will examine any impacts on commercial tender processes
and the time taken by APRA to assess and decide applications for
tailored MySuper products.
50. To qualify as a large employer, an employer or associate of that
employer must contribute or would, apart from a temporary cessation
of contributions, contribute to the fund for the benefit of at
least 500 members who are either employees of that employer or
employees of associates of that employer. For an employer that is
not currently contributing to that fund, they may qualify if APRA
expects that the employer and its associates will contribute for
500 members by the end of a time period specified by APRA. This
excludes any employee of the employer or associate in respect of
whom the employer or its associates does not make contributions on
their behalf to the fund as well as employees that have a chosen
fund different to the fund offering the tailored MySuper product.
Associate is defined at section 12 of the SIS Act and is broadly
consistent with the definition of associate in the Corporations
Act. [Schedule 1, item 9, division 3, paragraph 29TB(1)(b) and
subsection 29TB(2)]
51. Later tranches of legislation will also clarify that contributions
made to the fund that offers the tailored MySuper product by a
large employer for employees that only relate to a member's
entitlement to a defined benefit do not count towards the 500
members required for a tailored MySuper product.
52. Under the governing rules of the fund, the tailored MySuper product
may only be open to:
0. an employee or a former employee of the large employer;
0. an employee or a former employee of an associate of that
large employer; or
0. relatives or dependants of an employee or former employee
of the large employer and relatives or dependants of an
employee or former employee of an associate of the
specified employer.
[Schedule 1, item 9, division 3, paragraph 29TB(1)(c)]
53. However, under the governing rules of the fund, the tailored
MySuper product must be open to:
0. all employees of the large employer where that large
employer or an associate of that large employer
contributes to the fund or would, apart from a temporary
cessation of contributions, contribute to the fund for at
least one employee of that large employer; and
0. all employees of an associate of that large employer where
the large employer or an associate of that large employer
contributes to or would, apart from a temporary cessation
of contributions, contribute for at least one employee of
that associate.
[Schedule 1, item 9, division 3, paragraph 29TB(1)(a)]
54. An employer may be required by a modern Award to make contributions
to a specified fund or one of a group of specified funds for
employees that are employed under that Award and do not have a
chosen fund. Employers may contribute to a tailored MySuper
product in another fund for other employees that are not employed
under the Award. However, the tailored MySuper product must still
be open to all employees even though default contributions cannot
be made to the fund for the employees that are employed under the
modern Award. [Schedule 1, item 9, division 3, paragraph 29TB(c)]
55. If a member of a tailored MySuper product was to no longer meet the
requirements to remain a member of that particular product under
the governing rules of the fund, then the RSE licensee will be able
to transfer that member into another MySuper product within the
same fund or to an eligible rollover fund. For some tailored
MySuper products a member may no longer be eligible to remain in
the product if they ceased being an employee of the large employer,
whereas in other tailored MySuper products former employees may be
able to remain within the product. [Schedule 1, item 9, division
3, paragraph 29TB(1)(h)]
Cancellation of authorisation
56. APRA will be able to cancel the authorisation of a MySuper product
if:
0. it ceases to be satisfied that the governing rules of the
fund meets the required characteristics of a MySuper
product;
0. the RSE licensee was authorised to provide a tailored
MySuper product to a large employer and that large
employer either no longer meets the requirements to be
offered this product on the last day before the annual
reporting period or did not meet the 500 member test by
the end of the period specified in the authority;
0. it ceases to be satisfied that the RSE licensee is likely
to comply with the enhanced trustee obligations in
relation to MySuper products;
0. it ceases to be satisfied that the RSE licensee will
satisfy the fee rules in relation to MySuper products;
0. it ceases to be satisfied that the RSE licensee is not
likely to represent a product as a MySuper product when
they are not authorised to do so;
0. the fund no longer has five or more members, or was
granted authorisation on the basis that the fund is
expected to have five or more members within a time period
specified by APRA and that fund does not have five or more
members by the end of that time period;
0. it ceases to be satisfied that the fund is not an eligible
rollover fund;
0. the RSE licensee contravenes a governing rule of the fund
in relation to the MySuper product; or
0. the fund ceases to be registered.
[Schedule 1, item 9, division 4, subsection 29U(2)]
57. If APRA decides to cancel the authorisation of an RSE licensee to
offer a MySuper product, it is required to notify the RSE licensee
in writing of the reasons for their decision. [Schedule 1, item 9,
division 4, subsections 29U(1) and (3)]
58. APRA will be required to consult with the Australian Securities and
Investments Commission (ASIC) before deciding to cancel an
authorisation to offer a MySuper product for an RSE licensee that
is also a financial services licensee if it believes that the
cancellation will affect the RSE licensee's ability to offer one or
more financial services. Further, if APRA cancels the licence of
an RSE licensee that is also a financial services licensee, it is
required to notify ASIC within one week of the cancellation.
However, failing either of these requirements will not invalidate
the cancellation of the authorisation. [Schedule 1, item 9,
division 4, section 29UA]
59. APRA may specify in its notice of cancellation of an authorisation
to offer a MySuper product that the authority may continue in
effect as if the cancellation had not occurred for specified
provisions of the SIS Act or Superannuation Industry (Supervision)
Regulations 1994 (SIS Regulations), or any other law of the
Commonwealth. In relation to specified matters or for a specific
period of time or both. For example, APRA may allow a MySuper
authorisation to continue for a specified period of time for a
tailored MySuper product if the authorisation is cancelled due to
the employer no longer meeting the specified requirements, to allow
sufficient time to transfer member interests to another MySuper
product. [Schedule 1, item 9, division 4, section 29UB]
60. It is intended that later tranches of legislation may also enable
APRA to cancel authority for an RSE licensee to be able to offer a
MySuper product if it breaches any of the conditions around
insurance or disclosure requirements.
61. It is also intended that a cancellation of authority to offer a
particular MySuper product will require the RSE licensee to
transfer the accrued balances of the members of that product to an
authorised MySuper product. This will be clarified in later
tranches of legislation in conjunction with provisions dealing with
transition of accrued balances.
62. A decision by APRA to cancel an RSE licensee's authorisation of a
MySuper product will be a reviewable decision. [Schedule 1, item
7, paragraph 10(1)(dob)]
Misrepresentation of MySuper products
63. All persons will be prohibited from being able to offer MySuper
products unless they are authorised by APRA. If a person
represents that they offer a MySuper product when they are not
authorised, this is an offence of strict liability. A penalty of
60 penalty units will apply. [Schedule 1, item 9, division 6,
section 29W]
64. A strict liability offence is necessary as the consequences of an
RSE licensee contravening this provision could inadvertently cause
an employer contributing superannuation benefits for their
employees to the fund to be in breach of its requirements under the
SG Act, which may cause that employer to incur a superannuation
guarantee shortfall charge. [Schedule 1, item 9, division 6,
subsection 29W(2)]
Application and transitional provisions
65. These provisions will commence from 1 January 2013 or a single day
to be fixed by Proclamation. An earlier day may be set by
Proclamation for the commencement of these provisions if APRA is
able to begin accepting applications for authorisation. [Item 2,
subsection (2)]
66. Commencing the provisions from 1 January 2013 provides certainty to
industry that applications for authorisation to offer a MySuper
product will be accepted from this date. However, if APRA has
issued prudential standards and is able to begin accepting
applications prior to 1 January 2013, allowing an earlier day to be
fixed by Proclamation means that applications could be made earlier
providing a longer lead time for both funds and APRA.
67. This will allow RSE licensees to apply for authorisation to offer a
MySuper product prior to being able to offer the product on 1 July
2013. [Schedule 1, item 11]
Do not remove section break.
Outline of chapter
1. This chapter explains the key characteristics of MySuper products.
Summary
2. To offer a MySuper product, a fund's governing rules must set out
the rights, obligations and rules relating to the MySuper product.
3. To authorise an RSE licensee to offer a MySuper product, APRA must
be satisfied that the governing rules of the fund ensure that the
MySuper product will have certain characteristics. These
characteristics are that the class of beneficial interest that is a
MySuper product has:
a single, diversified investment strategy;
equal access to options, benefits and facilities for all members of the
MySuper product;
processes for amounts to be attributed to members in a way that does not
stream gains or losses to only some members of the MySuper product, with an
exemption for lifecycle investment strategies;
no differences in the extent of fee subsidisation of employees of a certain
employer if fee subsidisation is allowed by employers;
no limits on the source or kinds of contributions made by or on behalf of
members;
a prohibition on replacing a member's interest in that MySuper product with
another beneficial interest unless the member consents in writing to the
replacement no more than 30 days before the replacement occurs or the
replacement is permitted, or is required, by a law of the Commonwealth; or
no pension benefits paid from the assets of the MySuper product to members
in retirement.
Detailed explanation of new law
Single, diversified investment strategy
4. For an RSE licensee to be authorised to offer a MySuper product,
APRA must be satisfied that the fund has governing rules (including
the trust deed) that has a class of interest that meets the
characteristics of a MySuper product. [Schedule 1, item 9,
division 3, paragraph 29T(1)(g)]
5. MySuper products must have a single, diversified investment
strategy in relation to those assets that are attributable to the
MySuper product. [Schedule 1, item 9, division 3, paragraph
29TC(1)(a)]
6. RSE licensees must be able to clearly identify those assets which
are attributable to each MySuper product they offer. This will be
necessary for the RSE licensee to satisfy the requirement that they
adopt a single diversified investment strategy in relation to the
assets of the MySuper product. In addition, it will be necessary
for the RSE licensee to be able to identify the assets attributable
to each MySuper product for reporting to APRA. [Schedule 1, item
9, division 3, paragraph 29TC(1)(a)]
7. An RSE licensee can separately identify assets by separately
accounting for those assets thereby allowing MySuper products to
fit within an existing fund. Assets that underpin a MySuper
product do not have to be physically segregated from assets that
underpin choice products within the fund. Hence, underlying assets
of MySuper products and choice products may be pooled for
investment purposes. [Schedule 1, item 9, division 3, paragraph
29TC(1)(a)]
8. RSE licensees that are authorised to offer more than one MySuper
product may have a separate investment strategy for each MySuper
product they offer, although the same investment strategy could be
used for two or more MySuper products that they offer. As noted by
paragraph 4.6, in this case, an RSE licensee must be able to
identify the assets attributed to each MySuper product that use the
same investment strategy. [Schedule 1, item 9, division 3,
paragraph 29TC(1)(a)]
9. A lifecycle investment strategy will be able to be adopted as the
single diversified investment strategy of the MySuper product. RSE
licensees that offer a lifecycle investment strategy for their
MySuper product may vary the method of crediting investment returns
to a member's account, on the basis of:
0. the member's age;
0. on the basis of the age of the member and other factors
prescribed by regulations; or
0. on the basis of the age of the member and other factors in
circumstances prescribed by the regulations.
[Schedule 1, item 9, division 3, subsection 29TC(2)]
10. However, the lifecycle investment strategy must be the same for
all members of that MySuper product. For example, two members with
the same characteristics taken into consideration by the RSE
licensee in determining the lifecycle strategy must have the same
investment returns credited to their accounts. [Schedule 1, item
9, division 3, subsection 29TC(2)]
Access to options, benefits and facilities
11. The same options, benefits and facilities must be available to all
members of a MySuper product. This includes, but is not limited
to, access to call centres, member education, intra-fund advice if
offered, the capacity to make death benefit nominations, online
account information or other services that may be provided by the
RSE licensee for members of the MySuper product. [Schedule 1, item
9, division 3, paragraph 29TC(1)(b)]
12. This rule applies to each MySuper product. For example, an RSE
licensee could provide a member education seminar if it was open to
all members of their MySuper product. The fund could not restrict
the availability of that seminar to only the employees of a certain
employer. However, an RSE licensee that offers a tailored MySuper
product that only has members that are employees of a large
employer could provide a member education seminar only for the
benefit of the employees of that employer. [Schedule 1, item 9,
division 3, paragraph 29TC(1)(b)]
13. Providing access to the same options, benefits and facilities does
not require services to be delivered in an identical way to all
members. For example, education seminars may not be able to be
provided in person to all members of the fund. If that is the
case, an RSE licensee may provide equal access to education
seminars by offering them in a few key locations and provide access
to members unable to attend in person by placing the educational
material used in the seminars on the fund's website. [Schedule 1,
item 9, division 3, paragraph 29TC(1)(b)]
14. Any service or activity provided by an RSE licensee that is
organised, and is directly paid for in full, by a particular
employer and not paid for from fund assets can be made available to
certain employees only. This is a service provided by an employer
and should not be considered a MySuper product feature,
irrespective of whether it is associated with employees of the
particular employer who are members of a MySuper product in a fund
operated by that RSE licensee.
15. Later tranches of legislation will clarify that access to insurance
cover may differ for members as a result of their age, medical
status, occupation or other factors.
Attributing gains and losses to member accounts
16. The same process must be adopted in attributing gains and losses to
the accounts of members of a MySuper product. [Schedule 1, item 9,
division 3, paragraph 29TC(1)(c)]
17. With respect to investment returns, preference will not be able to
be given to certain members by attributing gains and losses over a
different period for those members. The only exception is for
lifecycle investment strategies that will allow the investment
returns of certain assets to be allocated to members based on their
age and, if used by the RSE licensee, other factors prescribed by
regulations. [Schedule 1, item 9, division 3, paragraph
29TC(1)(c)]
18. Similarly, with respect to fees, the timing and process for
charging these fees from member accounts must be the same. If an
investment fee is deducted from member accounts, this must be
applied to all member accounts at the same time. For example, an
investment fee cannot be deducted monthly from a certain subgroup
of members and annually from another subgroup of members.
[Schedule 1, item 9, division 5, subsection 29VA(1)]
19. To the extent that an employer chooses to directly subsidise the
fees of their employees that are members of a MySuper product, a
different process may be adopted to accommodate the fee
subsidisation. If an employer chooses to subsidise the fees of
employees through increased contributions then there would be no
basis for a differentiation in the process used to deduct fees from
member accounts. [Schedule 1, item 9, division 3, paragraph
29TC(1)(d) and (e)]
20. For example, the MySuper product may provide for an investment fee
to be deducted monthly. While the investment fee must be the same
for each member and calculated on the same basis for all members,
an RSE licensee could invoice an employer for the fees they choose
to subsidise and allow for this to be paid at the end of the
financial year rather than at the same time the member would
otherwise pay that fee.
21. Employers that subsidise fees will not be able to subsidise their
employees differently. If the employer subsidises a flat fee, then
the amount by which that flat fee is reduced by fee subsidisation
must be the same for all employees of that employer who are members
of the MySuper product. If the employer subsidises a percentage-
based fee, then the amount by which the percentage is reduced by
fee subsidisation must be the same for all employees of that
employer. Similarly, if the employer subsidises a fee that is a
combination of a flat fee and a percentage-based fee, then the
amount that the flat fee and percentage-based fee is reduced must
be the same for all employees of that employer who are members of
the MySuper product. [Schedule 1, item 9, division 3, paragraph
29TC(1)(e)]
Contributions
22. The governing rules in relation to a MySuper product will not be
able to impose any limitation on the source of contributions by, or
on behalf of, members of the MySuper product. Contributions must
be accepted to a MySuper product whether they are made by an
employer or the member directly. However, this does not require
contributions to be accepted by a non-public offer fund from any
individual. The governing rules of the fund may limit who may
become a member of the fund. [Schedule 1, item 9, division 3,
paragraph 29TC(1)(f)]
23. There will also be no limitation to the kind of contributions made
by or on behalf of members, unless those contributions are of a
kind prescribed by the regulations. The kinds of contributions
that may be made by or on behalf of members include, but are not
limited to superannuation guarantee contributions, salary sacrifice
contributions, after-tax contributions and spouse contributions.
RSE licensees must also not limit roll-overs or transfers to a
MySuper product unless they are permitted to refuse acceptance of a
rollover or transfer in respect of members of the MySuper product
as set out in the SIS Regulations. The regulations may provide,
for example, that RSE licensees will not be required to accept in-
specie contributions and contributions in foreign currencies,
however, RSE licensees will be able to accept these contributions
if they elect to do so. RSE licensees will also not have to accept
any source or kind of contribution where a limitation is imposed
under a law of the Commonwealth or the general law. [Schedule 1,
item 9, division 3, paragraph 29TC(1)(f)]
Transfers
24. An RSE licensee may only transfer a member's interest in a MySuper
product to any other product in the fund, whether it is another
MySuper product or a choice product, where the member provides the
RSE licensee with consent to the transfer. An RSE licensee may
only transfer a member's interest in a MySuper product to another
fund if the member provides consent, or where the transfer is
required or permitted by a law of the Commonwealth. Consent must
be in writing and be given no more than 30 days before the transfer
occurs. [Schedule 1, item 9, division 3, paragraph 29TC(1)(g) and
(h)]
25. Currently, section 1017B of the Corporations Act requires that
where: there is a material event or significant change to a
member's interest that would require a change to the product
disclosure statement; or any other change that is prescribed by the
regulations; then that member must be provided with a notice
explaining the nature of the change. A notice of this type will
now also have to be provided by RSE licensees where the regulations
prescribe certain situations where an interest in a MySuper product
is transferred. In these circumstances, a notice may not have been
required currently under section 1017B possibly because the nature
of the change may have already been disclosed in the product
disclosure statement. These regulations may prescribe, for
example, a notice to be given where a trustee recommends or offers
to the member to transfer their interest in a MySuper product to
any other product, whether it is another MySuper product or a
choice product. [Schedule 1, item 1A, paragraph 1017B(1A)(c)]
26. Under section 1017B of the Corporations Act, notice must be given
30 days prior to a change in fees or charges taking effect. For
consistency with these requirements, consent in writing must be
given no more than 30 days before a transfer occurs. This ensures
that the member, prior to deciding to provide consent, has the
benefit of a notice setting out the changes to their interest that
will result from transferring to another MySuper product or to a
choice product. It is also appropriate that a member's decision to
transfer their interest is contemporaneous with the transfer
actually occurring.
27. RSE licensees may transfer members without their consent to another
superannuation fund if the transfer is permitted or required under
a law of the Commonwealth. This allows transfers to be made of a
member's interest to eligible rollover fund that is permitted under
Part 24 of the SIS Act. This will also permit an RSE licensee to
transfer members to a successor fund. However, it is intended that
the SIS Regulations will be amended to make it clear that where a
member's interest in a MySuper product is being moved to another
fund it will only satisfy the meaning of a successor fund if that
member's interest is placed in a MySuper product. In other words,
to comply with the equivalent rights test, it will be necessary for
a member's interest in a MySuper product to be moved to another
MySuper product. [Schedule 1, item 9, division 3, subparagraph
29TC(1)(h)(ii)]
28. This will also allow transfers to occur under any future law of the
Commonwealth once enacted, such as the automatic consolidation of
accounts that will not require the consent of the member.
MySuper products limited to pre-retirement phase
29. RSE licensees will not be permitted to brand any form of retirement
pension product as a MySuper product. For this reason, a pension
will not be payable within a MySuper product to members on meeting
a condition of release for retirement or reaching preservation age.
RSE licensees will still be able to pay pensions to retirees
within the fund as is presently the case; however, they will be
required to move these member's interests into a separate choice
product before commencing pension payments. [Schedule 1, item 9,
division 3, paragraph 29TC(1)(i)]
30. This is not intended to prevent the payment of an income stream
benefit under an insurance policy where the member has ceased work
on account of ill-health (whether physical or mental). Allowing
pension-style insurance benefits to be paid to a member while they
are a member of the MySuper product will be clarified in later
tranches of legislation.
31. Although a post-retirement option is not available within MySuper
at the moment, the Government will consult with relevant
stakeholders on whether MySuper products should be required to
include a post-retirement offering at some time in the future and
the framework that should apply.
Application and transitional provisions
32. These provisions will commence from 1 January 2013 or a single day
to be fixed by Proclamation. An earlier day may be set by
Proclamation for the commencement of these provisions if APRA is
able to begin accepting applications for authorisation.
33. Commencing the provisions from 1 January 2013 provides certainty to
industry that applications for authorisation to offer a MySuper
product will be accepted from this date. However, if APRA has
issued prudential standards and is able to begin accepting
applications prior to 1 January 2013, allowing an earlier day to be
fixed by Proclamation means that applications could be made earlier
providing a longer lead time for both funds and APRA.
34. This will allow RSE licensees to apply for authorisation to offer a
MySuper product prior to being able to offer the product on 1 July
2013. [Schedule 1, item 11]
Do not remove section break.
Outline of chapter
1. This chapter outlines all of the fees that RSE licensees are able
to charge members in relation to a MySuper product.
Summary
2. RSE licensees will only be able to charge the following fees in
relation to MySuper products:
an administration fee;
an investment fee;
a buy-sell spread;
a switching fee;
an exit fee; and
an activity fee(s).
3. RSE licensees will be prohibited from charging any other fee types
in relation to MySuper products.
4. This will prevent RSE licensees from being able to deduct fees from
member accounts that are not within the scope of the permitted fees
in relation to MySuper products, for example entry fees.
5. The charging rules for each fee type in relation to MySuper
products are described in more detail in Chapter 6 of this
Explanatory Memorandum.
Detailed explanation of new law
6. An RSE licensee will only be permitted to charge six types of fees
to members in relation to a MySuper product. These are: an
administration fee; an investment fee; a buy-sell spread; a
switching fee; an exit fee; and an activity fee(s). [Schedule 1,
item 9, division 5, subsection 29V(1)]
7. RSE licensees are not required to charge any of the permitted fees,
however, if they elect to charge a fee, they may only charge a
permitted fee.
8. Insurance premiums are not described as a permitted fee. However,
this is not intended to prevent an RSE licensee from deducting from
member accounts an amount that reflects the premium that is
attributable to each member. That premium may reflect the
characteristics of the member such as age and occupation, and may
also reflect the member's choice of coverage. Later tranches of
legislation will include rules in relation to insurance cover in
MySuper products.
9. A member may be charged an administration fee for purposes that
relate to the administration and operation of the fund. An
administration fee may include, but is not limited to, recovering
costs of:
0. processing contributions and dealing with employer-
sponsors;
0. providing member communication (for example, call
centres);
0. administration of the trustee office;
0. levies required to be paid to APRA;
0. product development;
0. overheads, including accommodation and information
technology; and
0. intra-fund advice (to be defined in more detail in a later
tranche of legislation).
[Schedule 1, item 9, division 5, subsection 29V(2)]
10. A member may be charged an investment fee for costs that relate to
the investment of the assets of the fund, including the payment for
the care and expertise in the investment and choice of the assets
and transaction costs incurred by the RSE licensee in relation to
investment products. An investment fee may include, but is not
limited to, recovering costs of:
0. engaging investment managers;
0. performance based fees paid to investment managers;
0. directly managing investments;
0. transaction costs involved in the buying and selling of
assets; and
0. asset consulting.
[Schedule 1, item 9, division 5, subsection 29V(3)]
11. Administration and investment fees must relate to the relevant
costs of administration and operation of the fund and the
investment of the assets of the fund respectively. This does not
restrict these fees to strictly recovering costs, but may also
include a profit margin for the RSE licensee. [Schedule 1, item 9,
division 5, subsections 29V(2) and (3)]
12. This Bill does not restrain an RSE licensee to deducting only the
fee disclosed in the product disclosure statement for the relevant
period. Rather, where costs vary from the disclosed fee, the
variation in costs may be charged to members as part of the
administration fee or investment fee. For example, the variation
may be charged to member accounts as an administration fee
subsequent to the disclosed administration fee being charged.
However, these amounts that are charged must still comply with a
fee charging rule at the point in time it is charged as explained
at Chapter 6 of this explanatory memorandum.
13. All costs that an RSE licensee could properly incur in relation to
a MySuper product should be able to be recovered under an
administration fee or investment fee. However, the RSE licensee
may instead separately charge for certain costs in exit fee,
switching fee, buy-sell spread or activity fee. An RSE licensee
may choose to do this to recover the costs of these actions from
members in relation to which the relevant action is taken instead
of charging for these costs across all members of the MySuper
product. [Schedule 1, item 9, division 5, sections 29V]
14. For superannuation funds that operate a unitised MySuper product,
the buy-sell spread is the difference between the price at which a
unit of the fund is valued and the price for which a unit may be
purchased or sold. A member may be charged a fee for the
transaction costs incurred by the RSE licensee from the acquisition
or disposal of assets should a member make a contribution to the
fund, or redeem assets from the fund through leaving the fund or
through changing their investment mix within the existing fund.
Buy-sell spreads will be limited to cost recovery. [Schedule 1,
item 9, division 5, subsection 29V(4)]
15. A member may only be charged a switching fee to recover the costs
incurred by the RSE licensee if a member decides to move all or
part of their interest in the fund to a different investment
option. This may be incurred if a member moves all or part of
their interest to a different product within the fund including:
0. from a MySuper product to a choice product;
0. from a choice product to a MySuper product;
0. from a choice product to a choice product; or
0. from a MySuper product to a MySuper product.
[Schedule 1, item 9, division 5, subsection 29V(5)]
16. RSE licensees will be able to waive switching fees if they elect to
do so, however, if charged, these fees will be limited to cost
recovery. This will allow, for example, an RSE licensee to permit
members to make a certain number of free switches in a given
period. [Schedule 1, item 9, division 5, subsection 29V(1)]
17. An exit fee may only be charged to a member to recover the direct
costs incurred by the RSE licensee when that member withdraws all
or part of their benefits from the fund. Exit fees will be
restricted to cost recovery. An exit fee cannot be charged in
relation to a member transferring to the pension product in the
fund. A switching fee could be charged in relation to this event.
However, as the costs of transferring a member to a pension product
in the fund may be greater than an investment switch, an RSE
licensee could choose to recover these costs as a separate fee in
the pension product that will not be subject to the charging rules
that apply to MySuper products. [Schedule 1, item 9, division 5,
subsection 29V(6)]
18. An activity fee may be charged to a member to recover the
transaction costs incurred by RSE licensees that:
0. are directly related to an activity that the RSE licensee
has engaged in, on the member's request; or
0. that relates to the member as required by law. [Schedule
1, item 9, division 5, subparagraph 29V(7)(a)(i)]
19. Activity fees will allow RSE licensees to recover costs incurred as
a result of a one off transaction in relation to a member. If an
RSE licensee charges an activity fee for a transaction, they cannot
recover the costs of that transaction as exit fees, switching fees
or buy-sell spreads. Examples of an activity fee include a family
law fee, whereby a member is required to have their account split
as a result of a family law settlement, or a death benefit
nomination. Activity fees will be limited to cost recovery in
MySuper products. [Schedule 1, item 9, division 5,
paragraph 29V(7)(b)]
20. These definitions of fees will be used in later tranches of
legislation to ensure that exit fees, switching fees and buy-sell
spreads are limited to cost recovery. Cost recovery is not
intended to apply to each instance of the fee being charged to a
member. Rather, a fee limited to cost recovery must be equal to
the average cost for the fund in undertaking that action.
21. Later tranches of legislation will also define those fees for
financial advice that can be deducted from member accounts. There
will also be specific charging rules that, in certain
circumstances, permit fees for financial advice to be charged
differently to members.
Application and transitional provisions
22. These provisions commence on 1 January 2013.
23. However, an RSE licensee will only be authorised to offer a MySuper
product from 1 July 2013 and must only charge the permitted fees in
relation to a MySuper product from this date. [Schedule 1, item
11]
Do not remove section break.
Outline of chapter
1. This chapter outlines the rules for the charging of fees to members
of a MySuper product.
Summary
2. If an RSE licensee charges a fee to members of a MySuper product,
it may only do so under one of the fee charging rules.
3. The fee charging rules apply to each of the fees that are permitted
to be charged in relation to a MySuper product, explained in
Chapter 5 of this Explanatory Memorandum.
4. The fee charging rules will prohibit an RSE licensee from
discriminating between members in relation to how they charge fees
to members of a MySuper product. This does not mean that members
will necessarily be charged the same fees in terms of dollars, but
rather members must be charged fees on a consistent basis.
5. The three charging rules under which a fee can be charged in
relation to a MySuper product are:
0. a flat fee to all members, whereby each member pays the
same fee for the product or service;
0. a percentage fee to all members, whereby each member is
charged the same percentage of their account balance at a
point in time for the service or product; or
0. a flat fee plus a percentage fee to all members, whereby
each member of the MySuper product is charged the same
flat fee and the same percentage of their account balance
at a point in time for the service or product.
6. If an RSE licensee charges a permitted fee to members of a MySuper
product, they must use the same charging rule for each member of
that MySuper product.
7. There are two exceptions to these charging rules that allow
different fees to apply to certain members.
8. First, a specific set of charging rules apply to the administration
fee for employees of an employer that are members of the MySuper
product if their employer has secured a discounted administration
fee under the single employer exemption as described in paragraph
6.18.
9. Second, a specific set of charging rules apply to investment fees
for RSE licensees charge different investment fees in a MySuper
product if it has a lifecycle investment strategy, it charges no
more than four investment fees and the investment fees for the age
cohorts reflect a fair and reasonable attribution of the investment
costs of the fund between the age cohorts
10. Other than where an RSE licensee is relying on one of these two
exemptions than all other fees charged to members of a MySuper
product are to be charged on a consistent basis.
11. An RSE licensee that offers a tailored MySuper product must comply
with the fee charging rules for each member of that tailored
MySuper product.
Detailed explanation of new law
12. The intention of the new fee charging rules is to prevent RSE
licensees from discriminating between members of a particular
MySuper product in relation to the process by which they charge
permitted fees.
13. If an RSE licensee elects to charge a permitted fee to members of a
MySuper product, it must satisfy one of the charging rules. The
three charging rules under which a fee can be charged in relation
to a MySuper product are:
0. each member of a particular MySuper product is to be
charged the same flat fee over the same period of time;
0. each member of a particular MySuper product is to be
charged the same percentage of their account balance in
relation to the MySuper product at a particular point in
time, for a fee over the same period of time; and
0. each member of a particular MySuper product is to be
charged the same flat fee plus the same percentage of
their account balance that relates to the MySuper product
at a particular point in time, for a fee over the same
period of time. [Schedule 1, item 9, division 5,
subsections 29VA(1) - (7)]
14. For any fee that applies to all members of the MySuper product,
such as an administration fee or an investment fee, each member is
to be charged the fee under the same charging rule. For example,
if one member is charged a percentage of their account balance in
relation to the MySuper product as an administration fee, then each
member of the MySuper product should be charged the same percentage
of their account balance in relation to the MySuper product at the
same point in time. This is to avoid any discrimination on the
process under which a member is charged a fee. [Schedule 1, item
9, division 5, subsections 29VA(1) - (4)]
15. RSE licensees that offer a MySuper product with a lifecycle
investment strategy will be required to charge all members the same
investment fee, regardless of which stage of the lifecycle they
belong to.
16. If an RSE licensee elects to charge a member-specific fee, such as
a buy-sell spread, switching fee, exit fee or an activity fee, each
member to which that fee relates must be charged the fee under the
same charging rule. For example, if one member is charged a flat
fee in relation to switching between two different investment
options, then each other member who switches between different
investment options should be charged the same flat fee. [Schedule
1, item 9, division 5, subsections 29VA(5) - (7)]
17. If an RSE licensees charges a percentage based fee for a buy-sell
spread, switching fee, exit fee or activity fee, then the
percentage fee must apply to that part of a member's account to
which the relevant action is taken action. For example, should a
member wish to transfer half of their account balance from a
MySuper product to a choice product, the RSE licensee will be
permitted to charge a fixed percentage fee on that half of the
member's account being transferred. [Schedule 1, item 9, division
5, subsections 29VA(5) - (7)]
Single Employer Exemption for Administration Fee
18. RSE licensees will be able to offer to employers an arrangement
that secures a discounted administration fee for their employees in
relation to a generic MySuper product. This will allow RSE
licensee to pass on the lower costs from any administrative
efficiency of dealing with an employer to the employees of that
employer. RSE licensees will not be permitted to provide discounts
to employers in relation to any of the other permitted fee types
within a MySuper product. [Schedule 1, item 9, division 5, section
29VB]
19. Any RSE licensee that offers a discounted administration fee will
be required to adhere to one of the charging rules. No employee is
to be given preference over another employee who is a member of the
MySuper product under these charging rules. The three permitted
charging rules in relation to administration fees for employees
whose employer has negotiated a discounted administration fee are:
0. each employee that holds an interest in a particular
MySuper product, whose employer has secured a discounted
administration fee in that product, must be charged the
same flat administration fee;
0. each employee that holds an interest in a particular
MySuper product, whose employer has secured a discounted
administration fee in that product, must be charged the
same percentage of their account balance in relation to
the MySuper product at a particular point in time, in
relation to the administration fee; and
0. each employee that holds an interest in a particular
MySuper product, whose employer has secured a discounted
administration fee in that product, must be charged the
same flat fee plus the same percentage of their account
balance that relates to the MySuper product for the
administration fee. [Schedule 1, item 9, division 5,
subsections 29VB(2) - (4)]
20. Employees of employers that contribute to a tailored MySuper
product are not entitled to any further administration fee
discounts under this exemption. A tailored MySuper product is
established for a single large employer who will be the only
employer sponsor for that MySuper product, so by definition, there
is no capacity to provide a discount to the administration fee as
there are no other employer sponsors within the MySuper product.
As no member of this product is to be given preference under the
charging rules, it would not be possible to provide an
administration fee discount to any subgroup of members within that
MySuper product.
21. It is intended that later tranches of legislation will outline
additional parameters with which an RSE licensee must comply in
order to offer an employer an arrangement that secures a discounted
administration fee for the employees of that employer.
Exemption for investment fees in lifecycle investment strategies
22. RSE licensees will be able to charge different investment fees to
different age cohorts in a lifecycle investment strategy of a
MySuper product if the investment fee charged complies with the
following conditions:
the fees charged to each cohort must be the same percentage of assets for
all members of the cohort; the same flat fee for all members of the cohort;
or be charged as the same combination of a percentage of assets and flat
fee to all members of the cohort;
there must be no more than four age cohorts with different investment fees
charged; and
the investment fees for the age cohorts must reflect a fair and reasonable
attribution of the investment costs of the fund between the age cohorts.
[Schedule 1, item 9, division 5, subsection 29VA(9)]
23. If these conditions are met, an RSE licensee will be able to charge
a different investment fee for each age cohort in the lifecycle
investment strategy. However, an RSE licensee is limited to a
maximum of four age cohorts, and therefore, a maximum of four
different investment fees for a MySuper product. [Schedule 1, item
9, division 5, paragraph 29VA(9)(c)]
24. An RSE licensee that operates a lifecycle investment strategy is
not required to charge multiple investment fees. The RSE licensee
may elect to charge a single investment fee to all members of the
MySuper product. In this case, the investment fee charged would
have to comply with the charging rules.
25. This exemption limits the number of possible investment fees that
may be charged in the interests of simplicity as well as providing
sufficient flexibility for RSE licensees that operate a lifecycle
investment strategy in a MySuper product to prevent inappropriate
cross-subsidisation between members.
26. A contravention of the charging rules outlined in this chapter is a
breach of a standard condition of an RSE licence under section 29E
of the SIS Act. If an RSE licensee fails to comply with a licence
condition, APRA may issue a direction to comply. Failure to comply
with a direction may result in the cancellation of the RSE licence
(under section 29G of the SIS Act) or prosecution for an offence
(under section 29JB of the SIS Act). APRA may also cancel the
authority to offer the MySuper product. [Schedule 1, item 9,
division 4, paragraph 29U(2)(d)]
Application and transitional provisions
27. These provisions commence on 1 January 2013.
28. However, an RSE licensee will only be authorised to offer a MySuper
product from 1 July 2013 and must comply with the charging rules
applying to MySuper products from this date. [Schedule 1, item 11]
Index
Schedule 1: MySuper
|Bill reference |Paragraph |
| |number |
|Item 1, paragraph 32C(2)(c) |2.9 |
|Item 1, paragraph 32C(2)(c) |2.10 |
|Item 1A, paragraph 1017B(1A)(c) |4.25 |
|Item 4, subsection 10(1) |3.19 |
|Item 6, subsection 10(1)) |3.18 |
|Item 7, paragraph 10(1)(dob) |3.62 |
|Item 7, paragraph 10(1)(doa) |3.40 |
|Item 8, subsection 29E(6A) |3.41 |
|Item 9, division 2, subsections 29S(3), (4) |3.25 |
|and (5) | |
|Item 9, division 2, section 29SA |3.26 |
|Item 9, division 2, paragraph 29SB(1)(a)) |3.27 |
|Item 9, division 2, paragraph 29SB(1)(b) |3.28 |
|Item 9, division 2, subsections 29SB(2) and |3.29 |
|(3) | |
|Item 9, division 2, subsection 29SB(4) |3.31 |
|Item 9, division 3, subsection 29T(1) |3.32 |
|Item 9, division 3, paragraph 29T(1)(g) |3.33 |
|Item 9, division 3, paragraph 29T(1)(f) |3.34, 4.4 |
|Item 9, division 3, sections 29T and 29TD |3.35 |
|Item 9, division 6, section 29W |3.37, 3.63 |
|Item 9, division 3, subsection 29T(2) |3.38 |
|Item 9, division 3, sections 29TD and 29TE) |3.39 |
|Item 9, division 6, section 29WA |2.11, 2.12, |
| |2.13, 2.14 |
|Item 9, division 2, subsection 29S(1)) |3.20 |
|Item 9, division 3, section 29TA |3.42 |
|Item 9, division 3, section 29TB |3.45 |
|Item 9, division 3, paragraph 29TB(1)(b) and|3.50 |
|subsection 29TB(2) | |
|Item 9, division 3, paragraph 29TB(1)(c) |3.52 |
|Item 9, division 3, paragraph 29TB(1)(a) |3.53 |
|Item 9, division 3, paragraph 29TB(c) |3.54 |
|Item 9, division 3, paragraph 29TB(1)(h) |3.55 |
|Item 9, division 4, subsection 29U(2) |3.56 |
|Item 9, division 4, subsections 29U(1) and |3.57 |
|(3) | |
|Item 9, division 4, section 29UA |3.58 |
|Item 9, division 4, section 29UB |3.59 |
|Item 9, division 3, paragraph 29T(1)(d) |3.21 |
|Item 9, division 6, subsection 29W(2) |3.64 |
|Item 9, division 3, paragraph 29T(1)(g) |4.4 |
|Item 9, division 3, paragraph 29TC(1)(a) |4.5, 4.6, 4.7,|
| |4.8 |
|Item 9, division 3, subsection 29TC(2) |4.9, 4.10 |
|Item 9, division 3, paragraph 29TC(1)(b) |4.11, 4.12, |
| |4.13 |
|Item 9, division 3, paragraph 29TC(1)(c) |4.16, 4.17 |
|Item 9, division 5, subsection 29VA(1) |4.18 |
|Item 9, division 3, paragraph 29TC(1)(d) and|4.19 |
|(e) | |
|Item 9, division 3, paragraph 29TC(1)(e) |4.21 |
|Item 9, division 3, paragraph 29TC(1)(f) |4.22, 4.23 |
|Item 9, division 3, paragraph 29TC(1)(g) and|4.24 |
|(h) | |
|Item 9, division 2, subsection 29S(2) |3.22, 3.24 |
|Item 9, division 3, subparagraph |4.27 |
|29TC(1)(h)(ii) | |
|Item 9, division 3, paragraph 29TC(1)(i) |4.29 |
|Item 9, division 5, subsection 29V(1) |5.6 |
|Item 9, division 5, subsection 29V(2) |5.9 |
|Item 9, division 5, subsection 29V(3) |5.10 |
|Item 9, division 5, subsections 29V(2) and |5.11 |
|(3) | |
|Item 9, division 5, sections 29V |5.13 |
|Item 9, division 5, subsection 29V(4) |5.14 |
|Item 9, division 5, subsection 29V(5) |5.15 |
|Item 9, division 5, subsection 29V(1) |5.16 |
|Item 9, division 5, subsection 29V(6) |5.17 |
|Item 9, division 5, subparagraph |5.18 |
|29V(7)(a)(i) | |
|Item 9, division 5, paragraph 29V(7)(b) |5.19 |
|Item 9, division 5, subsections 29VA(1) - |6.13 |
|(7) | |
|Item 9, division 5, subsections 29VA(1) - |6.14 |
|(4) | |
|Item 9, division 5, subsections 29VA(5) - |6.16, 6.17 |
|(7) | |
|Item 9, division 5, section 29VB |6.18 |
|Item 9, division 5, subsections 29VB(2) - |6.19 |
|(4) | |
|Item 9, division 5, subsection 29VA(9) |6.22 |
|Item 9, division 5, paragraph 29VA(9)(c) |6.23 |
|Item 9, division 4, paragraph 29U(2)(d) |6.26 |
|Item 11 |3.36, 3.67, |
| |4.34, 5.23, |
| |6.28 |
|Item 12, subsections (1) - (4) |3.30 |
|Item 12 |2.17 |
|Item 12, subsections (5) and (6) |2.18 |
|Item 13 |2.16 |
Do not remove section break.
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