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
HOUSE OF REPRESENTATIVES
SUPERANNUATION LEGISLATION AMENDMENT (FURTHER MYSUPER
AND TRANSPARENCY MEASURES) BILL 2012
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)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Fees, costs and intrafund advice ................................... 7
Chapter 2 Insurance ..................................................................... 23
Chapter 3 Collection and disclosure of information ...................... 31
Chapter 4 Modern awards and enterprise agreements ................ 55
Chapter 5 Defined benefit members ............................................. 67
Chapter 6 Transition to MySuper .................................................. 73
Chapter 7 Eligible rollover funds................................................... 83
Index ..................................................................................................... 93
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
APRA Australian Prudential Regulation Authority
APRA Act Australian Prudential Regulation Authority
Act 1998
ASIC Australian Securities and Investments
Commission
Corporations Act Corporations Act 2001
DEEWR Department of Education, Employment and
Workplace Relations
ERF Eligible Rollover Fund
FW Act Fair Work Act 2009
FSCOD Act Financial Sector (Collection of Data) Act
2001
FWA Fair Work Australia
LI Act Legislative Instruments Act 2003
MySuper Core Provisions Bill Superannuation Legislation Amendment
(MySuper Core Provisions) Bill 2011
Retirement Savings Accounts Retirement Savings Accounts Act 1997
Act
RIS regulation impact statement
RSE registrable superannuation entity
SG Act Superannuation Guarantee (Administration)
Act 1992
SG Regulations Superannuation Guarantee (Administration)
Regulations 1993
SIS Act Superannuation Industry (Supervision) Act
1993
SIS Regulations Superannuation Industry (Supervision)
Regulations 1994
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SMSF self-managed superannuation fund
The Review The review into the governance, efficiency,
structure and operation of Australia's
superannuation system or the Super System
Review (Cooper Review)
TPCA Act Fair Work (Transitional Provisions and
Consequential Amendments) Act 2009
TPD total permanent disability insurance
Trustee Obligations and Superannuation Legislation Amendment
Prudential Standards Act (Trustee Obligations and Prudential
Standards) Act 2012
2
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 (Minister's Media Release No. 131 of 21 September 2011).
This Bill is the third tranche of legislation implementing the
Government's MySuper and governance reforms as part of Stronger
Super. The first tranche of legislation was introduced to the Parliament on
3 November 2011 as the Superannuation Legislation Amendment
(MySuper Core Provisions) Bill 2011 (the MySuper Core Provisions Bill).
The second tranche of legislation, the Superannuation Legislation
Amendment (Trustee Obligations and Prudential Standards) Act 2012 (the
Trustee Obligations and Prudential Standards Act) received Royal Assent
on 8 September 2012.
This Bill introduces the next stage of the reforms. The Bill:
· bans entry fees and sets criteria for the charging of other fees
in superannuation, including rules for the charging of
financial advice;
· requires all superannuation funds to provide life and TPD
insurance to members (excluding defined benefit members)
on an opt-out basis;
· enables APRA to collect information on a look-through
basis;
· requires the disclosure and publication of key information in
relation to superannuation funds;
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· allows only funds that offer a MySuper product and exempt
public sector superannuation schemes to be eligible as default
funds in modern awards and enterprise agreements;
· allows exceptions from MySuper for members of defined
benefit funds;
· requires trustees to transfer certain existing balances of
members to MySuper; and
· provides rules in relation to ERFs.
Date of effect: The majority of these provisions will apply from no earlier
than the commencement of the MySuper Core Provisions Bill or the
Trustee Obligations and Prudential Standards Act. This ensures that
appropriate provisions of this Bill commence at the same time as
provisions of the first two tranches of legislation.
· Schedule 1, relating to fees, costs and intrafund advice,
generally commences immediately after the commencement
of the MySuper Core Provisions Bill (being 1 January 2013
or an earlier date set by Proclamation);
· Schedule 2, relating to insurance, generally commences on
1 July 2013;
· Schedule 3, relating to collection and disclosure of
information, generally commences the day after the Bill
receives Royal Assent;
· Schedule 4, relating to modern awards and enterprise
agreements, generally commences the day after the Bill
receives Royal Assent;
· Schedule 5, relating to defined benefit members, generally
commences immediately after the commencement of the
MySuper Core Provisions Bill (being 1 January 2013 or an
earlier date set by Proclamation);
· Schedule 6, relating to the transition to MySuper, generally
commences immediately after the commencement of the
MySuper Core Provisions Bill (being 1 January 2013 or an
earlier date set by Proclamation);
· Schedule 7, relating to eligible rollover funds, generally
commences on 1 July 2013; and
4
General outline and financial impact
· Schedule 8, relating to other amendments, generally
commences immediately after the commencement of the
MySuper Core Provisions Bill.
Proposal announced: On 16 December 2010, the Minister announced the
Stronger Super reforms. On 21 September 2011, the Minister 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
Regulation impact on business
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 the transfer of accrued default
balances, types of insurance offered through superannuation and sections
2 and 3 of the appendix. A RIS exemption was granted for the remainder
of the Stronger Super reforms, which will be subject to a
post-implementation review.
Measures to be contained in subsequent tranches of
legislation
The MySuper and governance reforms will be implemented in several
tranches of legislation. This is the third tranche. Further reforms will be
contained in a subsequent tranche of legislation, including:
· additional governance measures relating to service providers,
voting, fines, reasons for decisions and access to the
Superannuation Complaints Tribunal; and
· consequential changes to the SIS Act, the Corporations Act
and the First Home Saver Accounts Act 2008.
5
Chapter 1
Fees, costs and intrafund advice
Outline of chapter
1.1 This chapter explains the requirement for an RSE licensee to
elect not to charge commissions in respect of amounts held in a MySuper
product, rules governing the charging for financial advice including
intrafund advice and the general fee rules that will apply to regulated
superannuation funds and approved deposit funds.
Context of amendments
1.2 The Government has committed to MySuper as a
commission-free superannuation product. Therefore, to be authorised to
offer a MySuper product, RSE licensees will need to design their
MySuper products so that they do not charge any fee that relates to
commission payments.
1.3 To ensure equitable charging of fees for financial advice
provided to members, it is important that those members seeking more
complex personal advice in relation to their superannuation bear the cost
of that advice. However, it is appropriate that superannuation funds
continue to be able to provide a member with simple, non-ongoing
personal advice relating to the member's interest in the fund -- commonly
referred to as intrafund advice -- and that this advice be able to be
collectively charged across the fund's membership.
1.4 Performance-based fees are used as an incentive to encourage
investment managers to obtain returns greater than they otherwise would
if they were simply paid an asset-based fee. However, the Review
identified a range of concerns with the current structure of
performance-based fees that mean they may not always be in members'
best interests. In response, the Government announced it would determine
parameters for performance-based fee arrangements in MySuper.
1.5 The charging of fees within superannuation is a crucial
determinant of the returns that members receive and the retirement
benefits that accrue to members. Certain fees may also impede
competition by inhibiting members from making active choices in relation
to their superannuation. For these reasons, the Government has
previously announced that entry fees would be prohibited and that certain
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other fees would be limited to being charged on a cost-recovery basis
only. Further, a fair and reasonable allocation of costs between different
products within a fund will ensure members are only charged for the
benefits and services they are receiving.
Summary of new law
1.6 An RSE licensee that applies for authorisation to offer a
MySuper product must elect not to charge members of a MySuper product
a fee that relates to the payment of conflicted remuneration in relation to a
MySuper product. This election effectively prohibits the trustee from
deducting any amount from a MySuper product that relates to making a
commission payment to a financial adviser.
1.7 New criteria will apply to any performance-based fee payable to
an investment manager in relation to assets of a fund that are attributable
to a MySuper product. However, a trustee may still have an arrangement
without all or some of these criteria if they can demonstrate the
arrangement promotes the financial interests of MySuper members.
1.8 Specific restrictions will apply to the types of personal advice
that superannuation trustees can charge collectively across their
membership. The types of personal advice for which a superannuation
trustee cannot charge across the membership of the fund are those types of
advice that are likely to be more complex in nature and therefore more
costly to provide. Further, only personal advice that is of a one-off or
transactional nature will be allowed to be spread across the membership of
the fund. All personal advice provided to members must comply with the
Corporations Act including the best interests duty, obligation for the
advice to be appropriate and the conflicted remuneration and other
prohibited remuneration provisions.
1.9 The cost of personal financial product advice that is provided to
an employer of one or more members of the fund will be prohibited from
being recovered through a fee charged to members of the fund. This
prevents commissions and other costs being deducted from the balances of
the employees of an employer in relation to advice that employer receives.
1.10 All regulated superannuation funds and approved deposit funds
will have to comply with some general fee rules. These include a
prohibition of entry fees and limitation on exit fees, switching fees and
buy-sell spreads to being charged at an amount that is not more than it
would be if it were charged on a cost recovery basis.
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Fees, costs and intrafund advice
1.11 An RSE licensee that charges a different administration fee to
employees of a particular employer in a MySuper product must comply
with an additional condition in relation to that administration fee. The
administration fee must be at least equal to the costs that reasonably relate
to the administration and operation of the MySuper product for those
employees.
Comparison of key features of new law and current law
New law Current law
An RSE licensee that applies for a No equivalent currently in the SIS
MySuper product must elect that Act.
they will not charge a fee on an
amount in a MySuper product that
relates to the payment of conflicted
remuneration to a financial services
licensee.
Performance-based fees must No equivalent currently in the SIS
comply with criteria regarding how Act.
the fee is determined.
Superannuation trustees are No specific restrictions on
prohibited from charging across the superannuation trustees charging
membership of the fund for across the membership of the fund
providing personal financial for providing financial product
product advice on specific topics advice.
and personal financial product
advice on an ongoing basis.
The cost of personal financial No equivalent currently in the SIS
advice that is provided to an Act.
employer of one or more members
of the fund will be prohibited from
being recovered through a fee
charged to any member of the fund.
Exit fees, switching fees and No equivalent currently in the SIS
buy-sell spreads will be limited to Act.
being charged at an amount that is
not more than it would be if it were
charged on a cost recovery basis.
For MySuper products, activity
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New law Current law
fees and insurance fees will also be
limited to being charged at an
amount that is not more than it
would be if it were charged on a
cost recovery basis.
Entry fees will be prohibited. No equivalent currently in the SIS
Act.
An administration fee charged to The MySuper Core Provisions Bill
employees of a particular employer requires a trustee to charge all
in a MySuper product that is employees of a particular employer
different to the administration fee the same administration fee,
charged to other members must, in whether it is the same flat fee, the
addition to being the same for all same percentage fee or the same
employees, be at least equal to the combination of flat fee and
costs that reasonably relate to the percentage fee.
administration and operation of the
fund for those employees.
Detailed explanation of new law
Election regarding fees in MySuper products relating to conflicted
remuneration
1.12 An RSE licensee that applies for authorisation to offer a
MySuper product must accompany their application with an election not
to charge members of the MySuper product a fee relating to the payment
of conflicted remuneration. [Schedule 1, item 18, subsection 29SAC(1)]
1.13 The RSE licensee must elect that they will not charge any
member of the MySuper product a fee in relation to that MySuper product
that relates directly or indirectly to costs of the fund in paying conflicted
remuneration to a financial services licensee or a representative of a
financial services licensee. This part of the election effectively prohibits
the trustee from making any commission payment to a financial adviser
that is deducted from a MySuper product. [Schedule 1, item 18,
subparagraph 29SAC(1)(a)(i)]
1.14 In addition, the election by the RSE licensee also extends to not
charging a member of the MySuper product a fee in relation to that
MySuper product that relates to costs of the fund in paying an amount to
another person that the RSE licensee knows, or reasonably ought to know,
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Fees, costs and intrafund advice
relates to conflicted remuneration paid by that other person to a financial
services licensee, or a representative of a financial services licensee.
[Schedule 1, item 18, subparagraph 29SAC(1)(a)(ii)]
1.15 Therefore, this second part of the election will prohibit an RSE
licensee from paying premiums on insurance policies that have embedded
commissions paid by an insurance company to a financial adviser in
relation to the insurance arrangements offered through the superannuation
fund. An RSE licensee will only have to elect not to pay amounts to other
parties to the extent that they know or reasonably ought to know that the
amount paid relates to the payment of conflicted remuneration. This
prevents an RSE licensee breaching the election due to another party to
whom they have paid an amount using part or that entire amount to pay
conflicted remuneration that they are unaware of, and cannot reasonably
be expected to be aware of.
1.16 For the purposes of this election, the meaning of conflicted
remuneration will also cover financial product advice provided to the RSE
licensee or to any other person to whom the RSE licensee pays an amount
that relates to the conflicted remuneration paid to the financial services
licensee or a representative of a financial licensee that provided the
advice. [Schedule 1, item 18, subsection 29SAC(3)]
1.17 Under the Corporations Act, a trustee of a superannuation fund
is considered to be a retail client if it has net assets of less than
$10 million. This definition would exclude most RSE licensees. For this
reason, all RSE licensees must be treated as a retail client to prevent the
cost of commission payments relating to advice provided to the RSE
licensee being deducted from a MySuper product in these circumstances.
[Schedule 1, item 18, subsection 29SAC(3)]
1.18 For example, an RSE licensee may receive advice in relation to
a life insurance product which the RSE licensee subsequently acquires for
the MySuper product members of the fund and the insurer may pay a
commission to the financial adviser in respect of that advice. The RSE
licensee will be deemed to be a retail client in relation to this advice,
which will mean that the commission is treated as conflicted remuneration
for the purposes of the election, even if, under the Corporations Act, the
RSE licensee is not a retail client.
1.19 If APRA is satisfied that the RSE licensee has failed to give
effect to this election then they will have the ability to cancel an
authorisation to offer a MySuper product. [Schedule 1, item 21,
paragraph 29U(2)(k)]
1.20 The election must be in writing and in the approved form.
[Schedule 1, item 18, paragraphs 29SAC(1)(b) and 29SAC(1)(c)]
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Performance-based fees
1.21 New criteria will apply to any performance-based fee payable to
an investment manager under a contract or arrangement to invest assets of
a fund that are attributable to a MySuper product. [Schedule 1, item 36,
section 29VD]
1.22 Performance-based fees typically entitle the investment manager
to a payment equal to a pre-determined percentage of the increased value
of the asset or income received from the investment that exceeds a given
benchmark over a particular testing period.
1.23 The criteria will apply to an arrangement entered into on or after
1 July 2013 if all or any part of the assets invested under that mandate is
attributable to a MySuper product that the superannuation fund offers.
[Schedule 1, item 36, subsection 29VD(1)]
1.24 There are five criteria that must be contained in the terms of the
arrangement the fund has with the investment manager if there is a fee
that is determined, in whole or in part, by reference to the performance of
the investment made by the investment manager on behalf of the trustee or
trustees of the fund. [Schedule 1, item 36, subsections 29VD(3) -- (7)]
1.25 The first criterion is that if the investment manager is entitled to
a fee in addition to the performance-based fee then this fee must be lower
than it would be if there was no performance-based fee. [Schedule 1, item 36,
subsection 29VD(3)]
1.26 This requires trustees to only agree to pay performance-based
fees where the investment manager puts at risk the fees they would
otherwise be entitled to. This ensures that there is sufficient incentive for
the investment manager to achieve the required performance.
1.27 The second criterion is that the period over which the
performance-based fee is determined must be appropriate to the kinds of
investment to which it relates. [Schedule 1, item 36, subsection 29VD(4)]
1.28 To satisfy this requirement, certain assets, such as infrastructure,
may require longer testing periods to reflect that these investments are
usually made for several years and may have high costs to exit early.
However, other assets that may be invested in over shorter periods, such
as bonds, could have shorter testing periods.
1.29 The third criterion is that the performance of the investment
must be measured by comparison with the performance of investments of
a similar kind. [Schedule 1, item 36, subsection 29VD(5)]
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Fees, costs and intrafund advice
1.30 An investment manager should only be paid a
performance-based fee where they generate returns that are greater than
assets with a comparable level of risk and that are subject to the same
market forces. For example, a performance-based fee for any shares
traded on the Australian Securities Exchange could be measured by
comparison to an after-tax benchmark that uses the All Ordinaries index.
In this example, it would not be appropriate to determine the performance
of these shares against the interest rate paid on Commonwealth
Government Securities.
1.31 The fourth criterion is that a performance-based fee must be
determined on an after-costs and, where possible, an after-tax basis.
[Schedule 1, item 36, subsection 29VD(6)]
1.32 This is consistent with the new obligation of RSE licensees in
relation to members that hold a MySuper product to promote the financial
interests of members, in particular returns to those beneficiaries (after the
deduction of fees, costs and taxes). Consistent with this obligation, the
trustee should only agree to an arrangement that is targeted to the
objective of maximising the returns members receive.
1.33 The fifth criterion is that the performance-based fee must be
calculated in a way that includes disincentives for poor performance.
[Schedule 1, item 36, subsection 29VD(7)]
1.34 Superannuation is a long-term investment and the culmination of
returns over a long period determines a member's retirement benefit. For
this reason, there must be commensurate disincentives for investment
managers to avoid underperformance compared to the potential
performance-based fee that provides the incentive to outperform.
1.35 A disincentive for poor performance must be part of the
calculation of the performance fee that is payable in any given testing
period.
1.36 For example, there may be clawback provisions that require
performance-based fees from earlier testing periods to be returned to the
superannuation fund if the investment manager underperforms in the
current testing period. Also, there could be high-water mark provisions
that require an investment manager to recover prior periods of
underperformance before becoming entitled to a performance-based fee in
the current testing period.
1.37 The ability to terminate the arrangement with an investment
manager without reasons and at short notice is not sufficient to satisfy this
criterion.
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1.38 A lack of disincentives can encourage investment managers to
pursue volatile investments that may entitle them to a performance-based
fee in one period without that fee being at risk in later testing periods.
This short-term focus without any consequences for the longer term return
is not in the interests of members for whom the ultimate objective is to
maximise their retirement benefit.
1.39 However, despite these five criteria, a RSE licensee may still
have an arrangement under which assets attributable to the MySuper
product are invested subject to a performance-based fee which does not
meet the criteria if it can demonstrate the arrangement promotes the
financial interests of the members of the fund that hold the MySuper
product. [Schedule 1, item 36, subsection 29VD(8)]
1.40 These criteria should be able to be included in the majority of
arrangements that trustees have with investment managers. It would be
difficult for a trustee to assert that a particular arrangement that did not
meet some or all of the criteria was in the best financial interests of
MySuper members where they could invest in those same assets under an
alternative arrangement that includes a performance based fee that does
contain these criteria or has no performance based fee. However, it may
not be possible to access certain assets, in particular assets sold through
international markets, without entering into an arrangement that does not
contain one or more of these criteria.
Intrafund advice
1.41 Superannuation funds often provide financial product advice to
their members -- commonly referred to as intrafund advice. This
financial product advice can be general (that is advice that does not take
into account the particular circumstances of the client) or personal (advice
that does take into account those circumstances). In the case of general
advice, it might be delivered through lectures or website material, while
personal advice is more likely to be delivered through a call centre or
meeting. As long as the superannuation trustee complies with the sole
purpose test under the Act, there are currently no restrictions on trustees
passing on the costs of providing this advice to their membership, most
commonly through the administration fee.
1.42 In recognition of the importance of retirement savings not being
eroded through excessive fees, the amendments place specific restrictions
on the types of personal advice that superannuation trustees can charge
across their membership as intrafund advice. The amendments do not
seek to inhibit the ability of a superannuation trustee to provide advice to
their members, but recognise that the cost of providing some types of
14
Fees, costs and intrafund advice
advice should be incurred directly by the member receiving the advice
rather than the membership of the fund as a whole.
1.43 The types of personal advice for which a superannuation trustee
will not be able to charge across the membership of the fund are those
types of advice that are likely to be more complex in nature and therefore
more costly to provide. In particular, a trustee will not be able to charge
across their membership for personal advice, provided by the trustee or an
employee or person acting under an arrangement with the trustee, to the
extent that:
· the person to whom the advice is given has not acquired a
beneficial interest in the fund, and the advice relates to
whether the person should acquire such an interest;
· the advice relates to a financial product other than a
beneficial interest in the fund, a related pension fund, a
related insurance product or a cash management facility;
· the advice relates to whether the member should consolidate
their superannuation holdings in two or more superannuation
entities into one; or
· the advice is ongoing personal advice, insofar as there is a
reasonable expectation that the trustee will periodically
review the advice, provide further personal advice, monitor
the implementation of recommendations or other prescribed
circumstances apply.
[Schedule 1, item 40, subsection 99F(1)]
1.44 In relation to the last item of the list, the amendments only allow
the cost of personal advice that is of a one-off or transactional nature to be
spread across the membership of the fund. Costs for an ongoing advice
relationship must be charged directly to the member. Under this
amendment, advice will be ongoing (and therefore subject to the
prohibition) where the member of the fund who receives the advice
reasonably expects that the provider will periodically review the advice,
provide further personal advice, monitor whether recommendations in the
advice are implemented, or monitor the results of implementing the
recommendations. [Schedule 1, item 40, subparagraph 99F(1)(c)(iv)]
1.45 In addition, it is expected that superannuation trustees that offer
advice services to their members that are collectively charged across the
membership of the fund will have in place internal policies to manage the
costs of those services and ensure they are not excessively used by any
particular member to the detriment of other members.
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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1.46 The amendments allow for the collective charging for advice
relating to a member's beneficial interest in the fund, including advice
about moving between investment options within the fund (for example,
from an accumulation option to a pension option). The amendments also
allow collective charging for advice about a related pension fund for the
member and the fund, a related insurance product for the member and the
fund, or a cash management facility. [Schedule 1, item 40,
subparagraph 99F(1)(c)(ii)]
1.47 These terms are defined for the purposes of this section. A
related pension fund is a fund out of which the member of the
superannuation fund would be entitled to receive a pension following the
release of benefits from the superannuation fund, where the RSE licensee
for the pension fund is the RSE licensee for the superannuation fund, or is
an associate of that RSE licensee. [Schedule 1, item 40, subsection 99F(2)]
1.48 This allows for collective charging for advice in relation to
moving a member, for example, from an accumulation fund to a related
pension fund. However, this will exclude personal advice to the member
about a specific financial product that the member's beneficial interest
should be invested in (for example, advice in relation to a regulated
acquisition as defined in section 1012IA of the Corporations Act). The
cost of such advice must not be charged across the membership of the
fund.
1.49 A related insurance product is a life policy or contract of
insurance by which the trustees of a fund provide insurance to holders of a
particular class of beneficial interest in the fund. [Schedule 1, item 40,
subsection 99F(3)]
1.50 A cash management facility an interest in a cash management
trust, a basic deposit product or a bank accepted bill. [Schedule 1, item 40,
subsection 99F(4)]
1.51 The amendments also provide for additional circumstances in
which the cost of providing personal advice must be charged directly to a
member to be prescribed by regulations. This provides for the flexibility
to allow for further circumstances or types of advice to be added, should
evidence indicate that the costs of superannuation trustees to provide this
form of advice are unreasonably eroding retirement savings. [Schedule 1,
item 40, subparagraph 99F(1)(c)(v)]
1.52 Many superannuation trustees outsource their advice services to
an external advice provider rather than providing these services in-house.
The rules outlined in these amendments governing the cost of financial
product advice apply regardless of whether the advice is provided
in-house or through an external advice provider acting under an
arrangement with the trustee. [Schedule 1, item 40, paragraph 99F(1)(a)]
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Fees, costs and intrafund advice
1.53 Nothing in these amendments operates to exclude the
application of the laws governing the provision of financial product advice
imposed by the Corporations Act. Importantly, this means that personal
advice provided to members must be appropriate and in the best interests
of the member. These amendments are about how superannuation trustees
recover the costs of providing advice services to their members.
1.54 ASIC is the responsible regulator for intrafund advice.
However, APRA may also cancel an RSE licensee's authorisation to offer
a MySuper product if, on the advice of ASIC, it is concluded that the RSE
licensee has not complied with section 99F. [Schedule 1, item 20,
paragraph 29U(2)(d)]
General fee rules
1.55 General fee rules will apply to certain fees charged by regulated
superannuation funds and approved deposit funds. However, these rules
will not apply to SMSFs and pooled superannuation trusts. [Schedule 1,
item 34, section 99A]
1.56 While RSE licensees will have to comply with the general fee
rules for all products they offer APRA will be able to specifically ensure
that the general fee rules are complied with in relation to a MySuper
product at the time they consider an application for authorisation. If a
RSE licensee does not comply with the general fee rules they will be in
breach of a standard condition on their RSE licence. In addition, if they
do not comply with the general fee rules in relation to the MySuper
product then APRA may cancel authorisation of that MySuper product.
[Schedule 1, item 19, paragraph 29T(1)(i) and Schedule 1, item 20, paragraph
29U(2)(d)]
1.57 The cost of financial product advice (other than intrafund
advice) provided to a member will be able to be charged to that member
as an advice fee. [Schedule 1, item 31, subsection 29V(8)]
1.58 The MySuper Core Provisions Bill requires an RSE licensee to
charge each member that has an interest in a MySuper product, and to
whom a particular activity relates, an activity fee calculated on the same
basis. For example, each member that requests that their contribution is
split must be charged the same flat fee, same percentage fee or same
combination of flat fee and percentage fee.
1.59 Therefore, to allow the costs of financial advice to be passed
directly to the member to whom it relates, an advice fee relating to
financial advice will not have to comply with the charging rules in relation
to MySuper products and may be a different fee for each MySuper
member. [Schedule 1, item 33, subsection 29VA(9)]
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
1.60 This means that for more complex financial advice the trustee
may charge for certain financial advice as an activity fee to pass the cost
of that advice directly onto the member who was provided that advice
rather than charging the costs of that advice to all members of the fund.
Financial advice may also be charged as part of the administration fee to
all members of the fund unless it is a certain type of personal advice that
must be charged to the member to whom the advice relates.
1.61 The cost of insurance premiums and any costs relating to the
provision of insurance for the member may be charged as an insurance
fee. The premiums that can be included in an insurance fee must be for an
insurance policy or contract for the realisation of a risk. It cannot include
premiums paid for an insurance policy or contract that is for investment.
These costs, if charged for, must be part of the investment fee. [Schedule 1,
item 33, subsection 29VA(10)]
1.62 The definition of insurance fee clarifies that amounts deducted
for the cost of insurance are to be considered a fee and, therefore, fall
within provisions that apply to fees such as the election not to charge a fee
that relates to conflicted remuneration.
1.63 An insurance fee in relation to a MySuper product will not have
to comply with the charging rules in relation to MySuper products and
may be a different fee for each MySuper member. This allows variability
in the insurance fee to reflect that there are different premiums that are
attributable to members depending on their level of coverage and other
relevant factors such as the age of the member.
1.64 The insurance fee charged must be an amount that is not more
than it would be if it were charged on a cost recovery basis. This will
ensure that a trustee cannot charge above cost fees outside of the two main
headline fees of a MySuper product -- the investment fee and
administration fee -- and the advice fee which may be charged where the
member seeks financial advice. These two main headline fees will be a
key point of comparison between MySuper products, and therefore, by
only allowing certain fees to be charged greater than cost recovery, this
comparability will place downward pressure on the total fees that are
charged to members in MySuper products. [Schedule 1, item 36,
subsection 29VC]
1.65 Similarly, an activity fee in MySuper will be limited to being
charged at an amount that is not more than if the fee was charged on a
cost-recovery basis. [Schedule 1, item 36, subsection 29VC]
1.66 The charging of entry fees will be prohibited. An entry fee is
defined as a fee that relates, directly or indirectly to the issuing of a
18
Fees, costs and intrafund advice
beneficial interest in a superannuation entity to a person who is not
already a member of the entity. [Schedule 1, item 40, subsection 99B(1)]
1.67 Buy-sell spreads, switching fees and exit fees will only be able
to be charged as an amount that is not more than it would be if the fee was
charged on a cost recovery basis. [Schedule 1, item 40, subsection 99C(1)]
1.68 Charging a fee on a cost recovery basis means that the fee aims
to recover the expected costs of that action. It does not require precise
cost recovery in each instance of the fee being charged to a member.
Rather, a cost recovery basis would mean that the cumulative amount of
fees must equal, as close as is practicable, the costs of undertaking that
action for all members that are charged the fee.
1.69 Regulations, if any, may prescribe in further detail ways in
which these fees may be calculated on a cost-recovery basis. [Schedule 1,
item 40, subsection 99C(2)]
1.70 The costs of providing personal financial advice to employers
cannot be included in any fee charged to any member of a superannuation
fund. Employees should not have their benefits reduced by costs relating
to personal advice provided to their employer in satisfying their
superannuation guarantee obligations, including selecting a default fund
for the contributions of their employees. [Schedule 1, item 40, section 99D]
1.71 Trustees must attribute costs of the fund fairly and reasonably
between the classes of beneficial interest in the fund. This means that
costs must be fairly and reasonably allocated across all MySuper products
and choice products offered by the fund. The attribution of costs will be
reflected in the fees charged to members consistent with the RSE licensee
satisfying its obligation to act fairly in dealing with classes of
beneficiaries within the entity. However, the fair and reasonable
attribution of costs also means that an RSE licensee should only deduct
costs that solely relate to a class of beneficiaries from that class. For
example, if there are certain costs of the fund which only relate to a choice
product, then these costs should only be deducted from that choice
product. There will also be some costs that are common to more than one
class of beneficiaries for which there may be more than one method for
attributing them fairly and reasonably. [Schedule 1, item 40, subsection 99E]
1.72 The definitions of administration fee, activity fee, investment
fee, buy-sell spread, exit fee and switching fee, as included in the
MySuper Core Provisions Bill, will be amended to refer to superannuation
entities. These definitions are used in the general fee rules which will
apply to entities that are not a regulated superannuation fund such as an
approved deposit fund. These definitions and the definition of general fee
19
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
rules will be included in the definitions of the Act in subsection 10(1) of
the SIS Act. [Schedule 1, 23 -- 30, section 29V]
1.73 As there will be new general fee rules, fees will be explicitly
added as a matter that can be dealt with in operating standards made in the
SIS Regulations. [Schedule 1, item 37, paragraphs 31(2)(da) and 31(2)(db)]
1.74 To avoid doubt, operating standards may be prescribed for any
aspect of the operation of an entity to which a covenant or other provision
of the Act or Regulations relates. Further, an operating standard is of no
effect to the extent it conflicts with the Act. [Schedule 1, item 38, section 33A]
Additional condition administration fee discounts
1.75 The MySuper Core Provisions Bill sets out the conditions that
must be met for a fund to be able to offer a different administration fee in
respect of employees of a particular employer, such as, that the
administration fee charged must be the same for each employee of that
particular employer.
1.76 An additional condition to be met by is that the total amount of
the administration fee charged to the employees of a particular employer
must be at least equal to an amount that reasonably relates to the
administrative and operating costs incurred by the fund in relation to those
members. This aims to ensure that any discounted administration fees
reflect actual administrative efficiencies, and also prevent cross
subsidisation of administration fees across different members of a fund.
[Schedule 1, item 35, subsection 29VB(5)]
1.77 The condition only applies to the administration fee charged in
relation to the members that are employees of the employer. It does not
prevent an employer from directly subsidising the administration fees of
their employees. In other words, the fee charged in relation to members
that are employees of the employer must at least equal the costs in the
administration and operation of the fund in relation to the members that
are employees of the employer but the fee may be paid fully or partly by
the employer.
1.78 Any costs incurred by the trustee of the fund in the
administration and operation of the fund that are charged as part of an
investment fee, a buy-sell spread, a switching fee, an exit fee or an activity
fee are excluded from this additional condition as these fees will have to
be the same for all MySuper members, not just the employees of a
particular employer. [Schedule 1, item 35, paragraph 29VB(5)(b)]
20
Fees, costs and intrafund advice
Application provisions
1.79 The general fee rules will not apply to a fee to the extent that it
is charged to a member in relation to a life policy that covered that
member immediately prior to 1 July 2013 and that policy is:
· a capital guaranteed life insurance policy where the
contributions and accumulated earnings may not be reduced
by negative investment returns or any reduction in the value
of assets in which the policy is invested;
· an investment account contract that is held solely for the
benefit of that member, and relatives and dependants of that
member -- to cover legacy products such as endowment and
whole of life policies. [Schedule 1, item 41]
1.80 The general fee rules will commence immediately after the
provisions of the MySuper Core Provisions Bill that relate to
authorisation. This allows APRA to assess trustees against the general fee
rules, in addition to the MySuper fee rules, when they apply for
authorisation to offer a MySuper product.
1.81 However, the general fee rules will only apply to funds from
1 July 2013. [Schedule 1, item 41]
21
Chapter 2
Insurance
Outline of chapter
2.1 This chapter explains the amendments relating to the provision
of benefits that are supported by an insurance policy to MySuper
members.
Context of amendments
2.2 Insurance is a key element of the benefits provided to members
of a superannuation fund.
2.3 These benefits protect members against the risk of not being
able to accumulate sufficient retirement savings, for themselves or their
dependents, due to having to cease work as a result of injury or illness or
as a result of death.
2.4 For this reason, the Government has announced that trustees will
be required to provide minimum levels of default life insurance and total
and permanent disability (TPD) insurance to members of their fund that
hold the MySuper product on an opt-out basis. Trustees that cannot
obtain opt-out insurance at a reasonable cost must provide MySuper
members with compulsory insurance.
2.5 Currently, some members are being charged premiums for
various types of insurance that may not be released to them when an
insurance payment is made for them, because the circumstances do not
meet a condition of release. The Government announced that it would
end this practice and believes that it is in best interests of members to
align the insurance definitions with the conditions of release so that
insurance is consistent with the purposes of superannuation and that
monies are available to members when the insurer makes a payment to the
fund under the relevant insurance policy.
2.6 Following the Review, the Government announced that,
following a suitable transition period, funds would be prohibited from
self-insuring any benefits of the fund, including life and TPD insurance
benefits. An exception to this prohibition will be defined benefit funds
that are permitted to self-insure. The ban on self-insurance will address
the risks of any short fall in insurance benefits being funded from other
23
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
member balances and also ensures that insurance benefits are paid from
authorised insurance institutions that are required to comply with relevant
prudential regulation.
Summary of new law
2.7 A trustee of a superannuation fund must provide MySuper
members with benefits by way of insurance that are for death and benefits
that are consistent with the definition of permanent incapacity in the SIS
Regulations. This definition of permanent incapacity will continue to be
prescribed by the SIS regulations as it will also be used to define the types
of insurance that can be offered.
2.8 A relevant member must have the option to opt-out of life and
TPD insurance unless the fund meets conditions prescribed in the
regulations. It is intended these include where a trustee is not able to
obtain opt-out cover at a reasonable cost. An RSE licensee may require a
member that wishes to opt-out of these benefits to opt-out of both the life
and TPD insurance.
2.9 Reasonable conditions will be able to be imposed in relation to
qualifying for life and TPD insurance given to the member. It would be
reasonable for the trustee to reflect conditions in the underlying insurance
policy in the benefits that are provided to members.
2.10 The existing requirement for a fund to offer a minimum level of
life insurance in order to accept contributions for employees that do not
have a chosen fund will be retained. This amount of insurance provided
to a MySuper member must be at least to that minimum unless the
member elects that the benefits not be provided or, if permitted by the
fund, the member elects to hold a lower amount of life insurance.
2.11 Operating standards will be able to be made in the SIS
Regulations on the kinds of benefits that may be offered by way of
insurance and the kinds of benefits that must be offered by way of
insurance. New regulations will be made to ensure that trustees only offer
insurance that is consistent with benefits that can be released under the
conditions of release in the SIS Regulations and to prohibit self-insurance.
Exceptions to these rules will be contained in the regulations, including an
exception from the prohibition on self-insurance for defined benefits
funds that self-insure for defined benefit members.
24
Insurance
Comparison of key features of new law and current law
New law Current law
Each member of a fund that holds There are no requirements in the
the MySuper product must be SIS Act regarding default insurance
offered benefits that are supported currently. However, to accept
by life and TPD insurance with the contributions from an employer for
ability to opt-out of these benefits. employees that do not have a
The amount of life insurance given chosen fund the fund must offer at
must be at least the minimum set least the minimum amount of life
out in the SG Regulations. insurance required by the SG
Regulations.
Operating standards will be able to The SIS Act does not expressly
deal with kinds of benefits that allow operating standards to be
must, and the kinds of benefits that made on types of insurance offered
must not, be provided by the or self-insurance.
trustee taking out insurance (or
insurance of a particular kind).
Detailed explanation of new law
Minimum level of life insurance for SG Act purposes
2.12 The sole purpose test permits benefits to be provided to
members of a superannuation fund, including on the member's death and
on the cessation of gain or reward in any business, trade, profession,
vocation, calling, occupation or employment on account of ill-health of
the member. Trustees that provide these benefits will typically purchase
insurance policies that provides for additional benefits on the realisation
of these risks.
2.13 Currently, to accept contributions from an employer on behalf of
an employee that does not have a chosen fund, a fund must offer a
minimum level of life insurance as set out in the SG Regulations. This
requirement will be changed so that a fund that accepts contributions for
employees must actually provide benefits to each MySuper member in
respect of death at the minimum level set out in the SG Regulations.
However, this amount will be subject to the member electing that the
benefits not be provided or, if it is permitted by the fund, the member
electing to hold a lower amount of life insurance. [Schedule 2, item 1,
paragraphs 32C(2)(d) and (e)]
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
Default insurance
2.14 There will be a general requirement for RSE licensees to provide
each member of a fund that holds the MySuper product benefits by taking
out insurance on permanent incapacity and in the event of the death of the
member. In other words, a fund that offers a MySuper product will have
to give life and TPD insurance as a default within their MySuper product.
[Schedule 2, item 6, section 68AA]
2.15 This will provide a safety net to members who are least likely to
give consideration to their insurance needs. To avoid doubt, to meet this
requirement it is not sufficient for trustees to simply release the member's
accrued superannuation balance. Rather, the trustee must provide benefits
by taking out an insurance policy or through self-insurance, where the
fund is permitted to self-insure under the operating standards. A failure to
comply with this requirement will be a breach of a standard condition of
the RSE licence. [Schedule 2, item 6, subsection 68AA(1)]
2.16 Permanent incapacity will be defined using the existing
definition in the SIS Regulations. This definition will be prescribed by
regulations to maintain consistency with present conditions of release and
because the definition will also be used to define the types of insurance,
particularly TPD insurance, that may be offered within superannuation.
[Schedule 2, item 3, subsection 10(1)]
2.17 Trustees may determine reasonable conditions under which the
provisions for death and permanent incapacity benefits may be made.
Reasonable conditions may include, but are not restricted to: the member
working a certain number of hours per week; the member accruing a
particular balance; or a member or their employer making a certain level
of contributions in a specified period. Where a trustee has taken out
insurance, a condition is also considered to be reasonable if it is the same
or corresponds with the terms and conditions of the underlying insurance
policy. Should a member not meet any reasonable condition set by a
trustee, the trustee will not be required to provide the insured benefits to
the member. The conditions that apply to life and TPD insurance may be
different. For example, a member may not qualify for TPD insurance
under a certain condition but may still qualify for life insurance.
[Schedule 2, item 6, subsections 68AA(3) -- (5)]
2.18 These insurance provisions mean that an RSE licensee may
apply reasonable conditions to the insured benefits that are provided to
members that hold a MySuper product that result in certain members not
being entitled to the benefits or that have the effect that certain members
are not entitled to the same level of benefits or are entitled to different
terms and conditions, notwithstanding the requirement of paragraph
29TC(1)(b) of the MySuper Core Provisions Bill that entitles members to
26
Insurance
access to the same options, benefits and facilities. Similarly, as these
provisions mean that an RSE licensee has the discretion whether to
provide MySuper members benefits for temporary incapacity, otherwise
known as income protection insurance, the conditions that apply to the
provision of that income protection insurance may also be determined by
the RSE licensee. These conditions may mean that members are no
longer entitled to the same insured benefits when they cease being an
employee of their current employer.
2.19 A member who holds the MySuper product may elect to opt-out
of the provided life and TPD insurance. An RSE licensee may require a
member to elect to opt-out of both life and TPD insurance. However, a
RSE licensee may also provide members the flexibility to opt-out of one
type of insurance if they wish.
2.20 Providing members with the option to opt-out of life and TPD
insurance allows them to protect their balance whilst accepting the
financial risks of death and permanent incapacity if they choose. It also
provides members with the option of obtaining this cover outside of
superannuation. If a member elects to opt-out of either life or TPD
insurance, the trustee is not required to provide this insurance to the
member. Funds may also permit members to increase or decrease their
insurance cover from the default amount. [Schedule 2, item 6, subsection
68AA(6)]
2.21 However, trustees will not have to comply with the opt-out
requirements should they meet the conditions prescribed in the regulations
in relation to the taking out of insurance. It is intended that the
regulations will provide an exception where a trustee is unable to obtain
opt-out insurance at a reasonable cost. Should a trustee meet the
conditions prescribed in the regulations, it will be required to offer
compulsory insurance for any member who holds the MySuper product.
[Schedule 2, item 6, subsections 68AA(7) and (8)]
2.22 Trustees will have the discretion to determine the minimum
levels of insurance they may provide for their members depending on
what is in members' best interests. Trustees may offer each member of
the fund the same minimum level of default life and TPD insurance or
they may vary the minimum level either across different workplaces or at
the member level. There are no additional restrictions applying to default
insurance. For example, this gives trustees the option of providing
different levels of default insurance cover to different categories of
employees within a particular workplace, reflecting their different
insurance needs.
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
2.23 The requirement for trustees to provide opt-out life and TPD
insurance to MySuper members does not apply if that member is a defined
benefit member of the fund. [Schedule 2, item 6, subsection 68AA(9)]
Operating standards for types of insurance and self-insurance
2.24 Operating standards will be able to be made in the SIS
Regulations that relate to the kinds of benefits that must not be provided
by taking out insurance and the kinds of benefits that must not be
provided other than by taking out insurance. It is expected there will be
two new operating standards on insurance under these provisions.
[Schedule 2, item 5, paragraphs 31(2)(ea) and (eb)]
2.25 First, an operating standard will be made to define the types of
insured benefits that can be offered through superannuation, where the
fund has taken out an insurance policy to provide these benefits.
[Schedule 2, item 5, paragraph 31(2)(ea)]
2.26 The operating standard will limit trustees to only taking out risk
insurance policies for the provision to beneficiaries of insured benefits
that satisfy the conditions of release in the SIS Regulations for death,
terminal medical condition, permanent incapacity and temporary
incapacity.
2.27 By using an operating standard, the types of insurance will be
directly aligned with the existing definitions of these concepts that are
used in the conditions of release in the SIS Regulations. This means that
members can only have premiums deducted to the extent that the trustee is
able to release the proceeds of that insurance policy to the member. This
ensures members are able to have the proceeds of insurance policies
released to them at the time a risk that they are insured for occurs. At
present, insurance that is not consistent with these definitions cannot be
released to members when the insurer makes a payment to the fund under
the relevant insurance policy. It is intended that these types of insurance
policies will have to be phased out over a transition period, which will be
prescribed by the operating standard. The operating standard will also
specify any exceptions to the restrictions on types of insurance.
[Schedule 2, item 5, paragraphs 31(2)(ea) and (eb)]
2.28 Second, an operating standard will be made prohibiting a
superannuation fund from providing insured benefits consistent with the
conditions of release for death, terminal medical condition, permanent
incapacity or temporary incapacity in the SIS Regulations unless it is
backed by an insurance policy. This operating standard will ensure that a
superannuation fund cannot self-insure unless it satisfies an exception
contained in the operating standard. In particular, an exception will be
made for defined benefit funds or schemes that are permitted to self-insure
28
Insurance
in respect of defined benefit members by a condition on their RSE license.
Prohibiting self-insurance will reduce the risk for other members should
the fund not maintain adequate capital resources to release unforseen
member claims as well as ensuring that the insurance provided complies
with the prudential requirements relating to insurance. [Schedule 2, item 5,
paragraph 31(2)(eb)]
Application provisions
2.29 An election by a member made prior to 1 July 2013 to opt-out of
life and TPD insurance will mean that they do not have to be provided
with life and TPD insurance after the commencement of these provisions.
The election must still be in force as at 1 July 2013. [Schedule 2, item 7]
2.30 If an election of a member made prior to 1 July 2013 only
related to one type of insurance then the requirement to provide life and
TPD insurance continues to apply for the other type of insurance. For
example, a member may have already elected not to be provided with life
insurance. However, if the fund did not offer TPD insurance at that time
and the election remained in force at 1 July 2013, the RSE licensee would
not have to provide life insurance, but would have to provide TPD
insurance unless the member subsequently made an election not to be
provided with that benefit. [Schedule 2, item 7]
29
Chapter 3
Collection and disclosure of information
Outline of chapter
3.1 This chapter explains amendments to the APRA Act, the
Corporations Act, the FSCOD Act and the SIS Act to expand the coverage
of APRA's data collection, enable the publication of data on MySuper
products, and improve disclosure for superannuation, including through
new requirements to publish a product dashboard and portfolio holdings.
Context of amendments
3.2 The Review identified a lack of transparency, comparability and,
consequently, accountability in Australia's superannuation system. In
particular, there is no standardised methodology for calculating and
disclosing relevant fund or investment option information. It was also
noted that members often rely inappropriately on historical investment
return data which gives no information about the risk attached to those
returns.
3.3 The Government has committed to improve transparency in the
superannuation system through enhanced disclosure requirements and
broadening APRA's ability to collect and publish information on the
operation and efficiency of superannuation funds.
3.4 MySuper products are intended to set a new benchmark for
superannuation in the level of transparency and comparability of key
performance information. APRA will collect and publish information on
the fees, costs and returns of each MySuper product.
3.5 The Review noted that portfolio disclosure in Australia is
unduly opaque and does not meet global best practice. Requiring the
disclosure of portfolio holdings will provide greater transparency and
allow members to understand where their superannuation is invested.
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
Summary of new law
APRA's data collection
3.6 APRA will have the ability to collect additional data from RSE
licensees. In particular, an obligation to provide relevant data will apply
to related bodies corporate, custodians of an RSE licensee and other
parties under a contract or arrangement with one of these entities or the
RSE licensee itself. This will allow APRA to collect more accurate and
complete data on the investments and costs of superannuation entities.
Publication of MySuper data
3.7 APRA will be required to publish information on the returns,
fees and costs of all MySuper products quarterly. This requirement does
not limit APRA from publishing other information regarding MySuper or
other superannuation products.
Requirements to publish a product dashboard and other information
3.8 RSE licensees will be required to publish a product dashboard
for each of the fund's MySuper and choice products on a part of their
website that is accessible to the public at all times. The product dashboard
will contain information on the investment return target and the number of
times the target has been achieved, level of investment risk, a statement
about the liquidity of the product and a measure of the average amount of
fees and other costs in relation to the product.
3.9 Funds will also have to disclose the remuneration of directors
and executive officers. Regulations will specify other documents to be
published on a fund's website to promote transparency.
Requirement to publish portfolio holdings
3.10 RSE licensees will be required to publish information regarding
their portfolio holdings on their website. The RSE licensee must publish
portfolio holdings as at the reporting day, which will occur once every six
months on 30 June and 31 December, within 90 days after each reporting
day.
3.11 A person who acquires a financial product or enters into a
custodial arrangement using the assets, or assets derived from the assets,
of an RSE under a contract or arrangement will be required to notify any
person with whom they are investing those assets that they will be
32
Collection and disclosure of information
required to provide the relevant information to the RSE licensee so that it
can satisfy its obligation to publish portfolio holdings.
3.12 Any person that receives a notification must provide information
sufficient to identify the financial product acquired and any other property
and financial products that they know, or reasonably ought to know, will
be acquired using assets, or assets derived from assets, of the RSE
licensee and the value invested, so that the RSE licensee is able to comply
with their obligation to publish portfolio holdings.
Comparison of key features of new law and current law
New law Current law
APRA may make a determination If a document relating to a financial
concerning the confidentiality of a sector entity is given to APRA in
reporting document or reporting accordance with the FSCOD Act and
documents of a specified kind that are is then determined by APRA to not
required to be given. APRA may contain confidential information then
determine whether a document of a it is not an offence for APRA to
particular kind is confidential even disclose the document or any
though the documents have not yet information contained in the
been received by APRA. document.
APRA may make a By legislative instrument, APRA can
non-confidentiality determination in determine whether a particular
relation to a specified part of a document given by a financial sector
reporting document (or reporting entity is non-confidential.
document of a specified kind), as well
as the whole of the reporting
document (or reporting document of a
specified kind).
APRA may determine that APRA may make a determination as
information is non-confidential if, to whether a reporting document
taking into account any contains confidential information but
representations made by interested there is no guidance as to how that is
parties, APRA considers that the to be assessed.
benefit to the public from the
disclosure outweighs any detriment to
commercial interests that the
disclosure may cause.
If APRA requires an RSE licensee to There are no provisions in the
provide information in relation to the FSCOD Act enabling APRA to
investment of assets, or assets derived require RSE licensees to provide such
from assets of the RSE licensee or a information to APRA, or applying to
person connected with the RSE persons connected with RSE
licensee, certain persons connected licensees.
with the RSE licensee, in or through
33
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
New law Current law
whom assets of or deriving from the
RSE are invested, will be required to
provide information to enable the
RSE licensee to report to APRA.
A choice product will be defined as a A choice product is defined in the
product which is not a MySuper Superannuation Legislation
product or a defined benefit product. Amendment (MySuper Core
Provisions) Bill 2011 as a product
which is not a MySuper product.
RSE licensees will be required to There are no existing requirements in
publish the details of the the SIS Act to publish detail of
remuneration of directors and remuneration.
executive officers. Further disclosure
of documents to promote systemic
transparency will be specified in
regulations.
When an RSE licensee provides There is no existing provision in the
information to any person, other than SIS Act requiring the provision of
if required to give the information to consistent information.
a Commonwealth agency, it will be
required to provide that information
which is consistent with information
provided to APRA under a reporting
standard.
APRA must publish quarterly There is no existing provision in the
information on MySuper products. SIS Act requiring publication of
This will include information on fees, MySuper data.
costs and net returns.
RSE licensees will be required to There is no existing requirement in
publish a product dashboard for each the Corporations Act for RSE
MySuper and choice product that is licensees to publish a superannuation
up-to-date, accurate and complete. product dashboard.
The product dashboard will contain
information on investment return
target, the number of times the
current target has been achieved,
level of investment risk, a statement
about the liquidity of the product and
a measure of the average amount of
fees and other costs in relation to the
MySuper product or investment
option during the last quarter,
expressed as a percentage of the
assets of the fund attributable to the
MySuper product or investment
option
RSE licensees must publish There are no existing requirements to
34
Collection and disclosure of information
New law Current law
information on their portfolio publish portfolio holdings in the
holdings as at the reporting day Corporations Act.
within 90 days of the reporting day.
Parties who acquire a financial There are no existing requirements
product using assets of an RSE, or for other parties to notify that assets
assets derived from assets of an RSE, invested relate to an RSE or to
will be required to notify the provider provide information to an RSE
of the financial product that they must licensee on financial products.
provide information to the RSE
licensee that will allow the RSE
licensee to comply with the
requirement to publish portfolio
holdings.
Detailed explanation of new law
APRA's data collection and publication
3.13 APRA will have an expanded role in the collection and
publication of data on superannuation entities. The additional data to be
published by APRA will provide members, employers, the industry, and
other interested stakeholders with information to compare the
performance of superannuation products. This will also enhance the
accountability of trustees in meeting their heightened duties to promote
the best financial interests of members that hold the MySuper product.
APRA's Secrecy obligations and determination
3.14 At present, section 57 of the APRA Act permits APRA to make
a determination that data provided in a particular reporting document,
which has been submitted in accordance with a reporting standard made
under the FSCOD Act, is non-confidential, and can be published without
breaching section 56 of the APRA Act.
3.15 APRA will now be able to make a determination on a class of
reporting document required to be given to APRA under the FSCOD Act
by a registered entity or a body regulated by APRA. It is also made clear
that APRA can make a determination in relation to a specified part (or the
whole of) a reporting document. [Schedule 3, item 4, subsection 57(1)]
3.16 Therefore, APRA's determination may cover document of a
certain type, or particular information within documents of that type.
Such a determination will be able to apply prospectively in relation to
reporting documents yet to be received by APRA. For example, APRA
35
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
may determine that information reported in specified line items of a
particular reporting form is non-confidential. APRA will also be able to
do this for a specific document that has been received by APRA (as is
presently the case). This change will allow APRA to streamline the
current determination process where APRA undertakes a single
consultation process as to the confidentiality of information but is required
to repeat confidentiality determinations as information is received in
accordance with periodic reporting requirements. [Schedule 3, item 4,
subsection 57(2)]
3.17 APRA will not be able to make a section 57 determination
unless it has given interested parties a chance to make a representation on
whether the document contains confidential information. [Schedule 3, item 4,
subsection 57(3)]
3.18 Where APRA's determination relates to a particular document
an interested party is defined as an entity or body which is required to give
the information to APRA under the FSCOD Act. APRA may make a
determination that information is not confidential if, taking into account
representations made by the interested party, APRA considers that the
benefit to the public from the disclosure outweighs any detriment to
commercial interests that the disclosure may cause. [Schedule 3, item 4,
paragraph 57(4)(a)]
3.19 Where APRA's determination is on a type of document then an
interested party is defined as an association or other body representing the
entities or bodies which are required to give the information to APRA
under the FSCOD Act. Again, APRA may make a determination that
information is not confidential if, taking into account representations
made by these parties, APRA considers that the benefit to the public from
the disclosure outweighs any detriment to commercial interests that the
disclosure may cause. [Schedule 3, item 4, paragraph 57(4)(b)]
APRA's ability to collect look through data
3.20 The Review identified that an existing deficiency in the
information available on superannuation entities is the costs of
downstream investment vehicles being deducted from gross investment
returns which may not be reported to APRA and often will not be charged
as an explicit fee to members.
3.21 The diagram below is an example of the types of arrangements
that the Review identified as currently obscuring the availability of
transparent and comparable information. An RSE licensee that provides a
mandate to an investment manager to invest assets may have an
arrangement that allows the investment manager to deduct their fees from
the investment return on assets. Similarly, investment vehicles such as
36
Collection and disclosure of information
managed investment schemes may also deduct their fees from the
investment return from assets. In the diagram, the member's assets earn a
return of 6.5 per cent from which the investment manager deducts a fee of
1 per cent and the managed investment scheme deducts a fee of 0.5 per
cent. An investment return of 5 per cent is returned to the RSE licensee
that provides it to members and charges an explicit fee of 1 per cent to
members. Similarly, the RSE licensee may report costs of 1 per cent to
APRA. Therefore, the full investment costs to members of 2.5 per cent
may not be disclosed.
Diagram 3.1
Member: charged
RSE licensee fees of 1% on 5%
return for net
return of 4%.
Custodian
Return of 5%
Investment
Managed Investment Scheme:
manager: deducts
deducts 0.5% of assets from
1% of assets from
investment return.
investment return. Return of 6.5%
Shares Real estate Infrastructure
3.22 For this reason, the Review recommended that APRA be
provided with the ability to collect information on a `look-through' basis.
This will ensure that the full costs of investing the assets of members are
provided to APRA and, through APRA's statistical publications, to
members.
3.23 APRA will be given an explicit power to make a reporting
standard, requiring RSE licensees to provide investment information on
their assets or assets derived from their assets that are invested by a
connected person who is a related body corporate of the RSE licensee, a
custodian holding the RSE licensee's superannuation assets, or a person
under a contract or arrangement with the RSE licensee, related body
corporate or custodian. [Schedule 3, item 29, subsection 13(4A)]
37
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
3.24 The reporting standard will be able to require information on
deductions from the return on investment, the financial products or other
property which the assets are invested in and the operations of the
investor. [Schedule 3, item 29, paragraphs 13(4A)(a) and (b)]
3.25 For example, under such a reporting standard, RSE licensees
may be required to provide information on assets and financial products
invested in a managed investment scheme, PST or other trust, which has
in turn invested the assets in financial products or property. A reporting
standard may impose such a requirement where the investment is by a
person connected with the RSE licensee. [Schedule 3, item 29, paragraphs
13(4A)(c),(d) and (e)]
3.26 As noted above, a reporting standard may require the RSE
licensee to provide information in relation to assets invested by a person
connected with the RSE licensee. [Schedule 3, item 29, paragraph 13(4B)(a)]
3.27 Where the assets are invested under contract or other
arrangement between the RSE licensee (or a related body corporate of the
RSE licensee or a custodian in relation to the relevant assets) and a person
connected with the RSE licensee then the contract or arrangement has an
implied term which requires the RSE licensee to notify the connected
person that the assets are derived from a RSE. [Schedule 3, item 29, paragraph
13(4B)(c)]
3.28 The contract or arrangement will also have an implied term
requiring the connected person to provide the RSE licensee with the
required information. [Schedule 3, item 29, paragraph 13(4B)(d)]
3.29 For example, if the RSE licensee invests assets of the
superannuation fund in an investment life policy issued by a related life
company, which in turn invests in a managed investment scheme of which
another related body corporate is responsible entity, both the life company
and the responsible entity will be persons connected with the RSE
licensee. Accordingly, a reporting standard may require the RSE licensee
to report on the underlying investments of the managed investment
scheme and the deductions on net returns imposed by the responsible
entity and life company.
3.30 These requirements may apply to several contracts or
arrangements that invest the assets, or assets derived from the assets, of an
RSE licensee through several parties as set out in example 3.1.
Example 3.1
An RSE licensee (ABC Super) invests assets of their fund through a
custodian. The custodian must invest as directed by ABC Super. The
custodian, at the direction of ABC Super, purchases units in Managed
38
Collection and disclosure of information
Investment Scheme 1. Managed Investment Scheme 1 is not a related
body corporate of ABC Super.
In this example, ABC Super must notify the custodian the assets are
those of ABC Super. The custodian must, in turn, notify Managed
Investment Scheme 1 that they are investing assets of ABC Super.
Information on the deductions from the investments and details on the
types of financial products and other property that is invested in must
be provided by each entity to the entity preceding it in the chain of
investment.
Managed Investment Scheme 1 provides the custodian details of the
costs it deducts from the investment return. In turn, the custodian
provides this information and details of the costs it deducts from the
investment return it received from Managed Investment Scheme 1 to
ABC Super.
The steps involved are set out in Diagram 3.2.
Diagram 3.2
ABC Super
Investment of Providing the
assets that require Custodian required
notification information
Managed Investment
Scheme 1
3.31 `Arrangement' and `financial product' are defined as having the
same meaning as under chapter 7 of the Corporations Act as these terms
are used with the same underlying concepts as the Corporations Act.
[Schedule 3, items 31 and 33, section 31]
3.32 Custodian, pooled superannuation trust, related body corporate,
registrable superannuation entity and RSE licensee are defined as having
the same meaning as in the SIS Act as these terms are used with the same
underlying concepts and are superannuation specific. [Schedule 3, items 32,
and 34 -- 37, section 31]
3.33 Information collected under a reporting standard that relates to
entities other than the RSE licensee will also be treated as protected
39
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
documents and protected information for the purposes of the APRA Act.
[Schedule 3, items 1 and 2, subsection 56(1)]
3.34 The objects of the FSCOD Act are amended to explicitly
acknowledge APRA's role in collecting data for the purposes of
publishing information given to it by financial sector entities. [Schedule 3,
item 26, paragraph 3(1)(aa)]
3.35 These amendments are not intended to prevent APRA from
seeking information, to the extent it is known to the RSE licensee, about
investments through entities that would not be required to provide
information under these new requirements. [Schedule 3, item 26, paragraph
3(1)(aa)]
APRA's publication of superannuation data
3.36 APRA will be required to publish quarterly information in
relation to MySuper fees, costs and net returns at the product level. This
will provide a central source of information on MySuper products and will
help inform consumers and drive competition between funds that offer
MySuper products. [Schedule 3, item 44, paragraph 348A(1)(a), (b) and (c)]
3.37 APRA will also be required to publish any other information to
be prescribed by the regulations. This allows flexibility to specify
additional information which APRA will be required to publish. [Schedule
3, item 44, paragraph 348A(1)(d)]
3.38 APRA must not publish information that would identify the
beneficiary of a regulated superannuation fund. [Schedule 3, item 44,
subsection 348A(2)]
3.39 APRA will also not be able to publish information to the extent
it would result in the acquisition of property without just terms, which is
not permitted by paragraph 51(xxxi) of the Constitution. [Schedule 3, item
44, subsection 348A(3)]
Product dashboard and other disclosure
Product Dashboard
3.40 RSE licensees will be required to publish a product dashboard
for each of the fund's MySuper and choice products. This should be made
available on a part of their website that is accessible to the public at all
times. The product dashboard will include key information, useful for
both new and existing members. Standardised disclosure of key
information will allow members to easily compare products and thus
make informed choices.
40
Collection and disclosure of information
3.41 Trustees of regulated superannuation funds must ensure that
each product dashboard is available publicly on their website, is updated
as required and contains the right information. [Schedule 3, item 8, paragraphs
1017BA(1)(a), (b), (c) and (d)]
3.42 A product dashboard for an investment option of a choice
product or a MySuper product will be required to include the investment
return target, the number of times the current target has been met in the
last ten financial years (or for the period the product has been offered if it
has been offered for less than ten financial years), the level of investment
risk, a statement about the liquidity, and the average amount of fees
(excluding activity fees, advice fees and insurance fees) and other costs
such as embedded investment costs in relation to the MySuper product or
investment option during the last quarter, expressed as a percentage of the
assets of the fund attributable to the MySuper product or investment
option. [Schedule 3, item 8, subsections 1017BA(2) and(3)]
3.43 It is expected that APRA will make reporting standards that will
determine the methodology that must be used in calculating the
information that is to be disclosed on the product dashboard.
3.44 An RSE licensee will be required to update the product
dashboard on their website within 14 days of the information changing.
For example, if the trustee decides to change the investment return target
for an investment option it must update the product dashboard within 14
days of making this change. In regards to the amount of costs incurred in
a quarter, this will have to be updated within 14 days of the end of the
each quarter to reflect the costs incurred in the previous quarter. [Schedule
3, item 8, paragraphs 1017BA(1)(c) and (d)]
3.45 It is important that the way information is displayed on a product
dashboard enables members to make comparisons between products.
Therefore, regulations may be prescribed on how the information in the
product dashboard must be displayed. [Schedule 3, item 8, paragraph
1017BA(1)(e)]
3.46 For the purposes of the product dashboard, the terms choice
product, member, MySuper product, and regulated superannuation fund
are defined as having the same meaning as in the SIS Act as these terms
are used with the same underlying concepts and are superannuation
specific. [Schedule 3, item 8, subsection 1017BA(5)]
3.47 ASIC will be able to issue a stop order if information in the
product dashboard is defective. This power could be used where the
product dashboard contains misleading or deceptive information, there is
an omission, or it is not updated as required. In this situation ASIC may
order specific conduct in respect of the product which the defective
41
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
product dashboard relates to in order to remedy the situation. ASIC
already has these stop order powers for other disclosure documents.
[Schedule 3, item 9, paragraph 1020E(1)(c), item 10, paragraph1020E(2)(c), item 11,
paragraph 1020E(7)(a) and item 12, paragraphs 1020E(11)(c)]
3.48 The product dashboard is a key reform to the superannuation
disclosure regime, and to ensure that the product dashboard is published
and available to members it will be an offence for a trustee, who is
required to publish a product dashboard, not to do so. [Schedule 3, item 14,
subsection 1021NA(1)]
3.49 It will also be an offence for a trustee to publish a product
dashboard containing defective information. This will apply if the trustee
knows that the information is not updated as required, contains misleading
or deceptive information or there is an omission. This will ensure that all
elements of the product dashboard are relevant, accurate and available to
members. [Schedule 3, item 14, subsections 1021NA(2) and(3)]
3.50 Strict liability will also apply to failure to update the product
dashboard as required and where there is an omission from the product
dashboard. This will apply whether or not the trustee knew or did not
know the information was not updated as required or there was an
omission. It is important for trustees to provide the product dashboard
and keep it up-to-date for the product dashboard to be useful for members.
Strict liability is imposed with regard to the product dashboard disclosure
requirements to reflect the benefit of these disclosures for consumers and
the importance that trustees maintain a level of vigilance to ensure that the
information is provided in an accurate and timely manner. The strict
liability offence mirrors similar offences that apply to other important
disclosures, such as a product disclosure statement. [Schedule 3, item 14,
subsection 1021NA(4)]
3.51 The trustee will have a defence where it has taken reasonable
steps to ensure that the dashboard was updated as required, not misleading
or deceptive, and contained no omissions. This is consistent with
defences available in relation to other disclosure offences. [Schedule 3, item
14, subsection 1021NA(5)]
3.52 Civil action against the trustee will be able to be taken by a
person who suffers loss or damage as a result of the trustee's product
dashboard not containing information as required by the 1017BA, not
being updated as required, containing misleading or deceptive
information, or if there is an omission. The trustee is not liable for civil
action if the trustee took reasonable steps to ensure that the information is
not misleading or deceptive or there would not be an omission from the
information. This is consistent with the other civil liability disclosure
offences in 1022B. [Schedule 3, item 15, paragraph 1022B(1)(f) and Schedule 3,
42
Collection and disclosure of information
item 16, paragraph 1022B(2)(f) and Schedule 3, item 18, paragraph 1022B(3)(e) and
Schedule 3, item 19, subsections 1022B(7B) and (7C)]
3.53 The requirement to publish a product dashboard will not apply
to investment options within a choice product if:
· the assets under the investment option are invested only in
one or more of the following:
- a capital guaranteed life insurance policy where the
contributions and accumulated earnings may not be
reduced by negative investment returns or any reduction
in the value of assets in which the policy is invested;
- a life policy providing benefits based solely on the
realisation of a risk, and not related to the performance of
an investment; and
- an investment account contract that is held solely for the
benefit of that member, and relatives and dependants of
that member -- to cover legacy products such as
endowment and whole of life policies.
· the sole purpose of the investment option is the payment of a
pension to members, such as an allocated pension investment
option;
· the assets of the fund invested under that investment option
are only invested in another single asset, such as individual
financial products offered on a platform. [Schedule 3, item 8,
subsection 1017BA(4)]
3.54 The MySuper Core Provisions Bill defines a choice product as a
product which is not a MySuper product. This definition is being
amended to define a choice product as a class of beneficial interest in a
regulated superannuation fund unless all the members of the fund who
hold the class of beneficial interest in the fund are defined benefit
members or the class of beneficial interest is a MySuper product. This
ensures that the product dashboard will not apply to defined benefit
arrangements. [Schedule 3, item 40, subsection 10(1)]
Remuneration and other information
3.55 An RSE licensee will have a new requirement to disclose the
details of remuneration of each executive officer if the RSE licensee is a
body corporate or each trustee if the RSE licensee is a group of individual
trustees. The details of this disclosure will be prescribed by regulations.
It is intended that these requirements will be modelled on the existing
43
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
requirements for listed companies at section 300A of the Corporations
Act. [Schedule 3, item 42, paragraph 29QB(1)(a)]
3.56 Currently a large amount of information is only available to
members through request or on the member only section of the website.
Therefore, regulations will be able to prescribe certain superannuation
specific documents that will have to be published on the public section of
the fund's website. [Schedule 3, item 42, paragraph 29QB(1)(b)]
3.57 It is intended that regulations will specify the following
documents to be published:
· The net returns of all MySuper and investment options of
choice products for the past ten years and the investment
return target for all MySuper and investment options of
choice products;
· The fund's trust deed(s) and any amending or supplemental
deeds;
· The fund's most recent audited financial report;
· The fund's most recent actuarial report (if applicable);
· The fund's product disclosure statements;
· The fund's annual report;
· The fund's financial services guide (if applicable);
· Each significant event or material change notification made
by the fund to any members;
· The names of all outsourced service providers;
· The name and a brief biography of each director or trustee, or
person involved in the trusteeship of the fund;
· Details of board meeting attendance by directors; and
· The fund's proxy voting policies and procedures as well as
voting behaviour.
3.58 ASIC will be the responsible regulator for this new provision in
the SIS Act. A failure to publish up-to-date information on the fund's
website at all times will be a strict liability offence carrying a penalty of
50 penalty units. A strict liability offence is necessary to ensure effective
44
Collection and disclosure of information
enforcement of this provisions by ASIC. Superannuation is a compulsory
system of retirement savings, therefore, it is appropriate that RSE
licensees do everything that they can reasonably do to ensure that there is
complete transparency on the financial products members have an
equitable interest in. However, recognising that this obligation will
extend to a wide range of information, a lower penalty will apply
compared to other disclosure-related offences. [Schedule 3, item 42,
subsections 29QB(2) and (3) and Schedule 3, item 39, subparagraph 6(1)(c)(ia)]
Obligation to give consistent information
3.59 To improve comparability of superannuation products, there will
be a requirement for consistency in how information is calculated. An
RSE licensee will be required to give any person, other than an agency of
the Commonwealth, information that is calculated in the same way as
required under a reporting standard made by APRA. [Schedule 3, item 42,
subsection 29QC(1)]
3.60 Regulations will be able to prescribe situations where
information that is disclosed is provided to APRA under a reporting
standard does not have to be calculated in the same way. This will allow
for regulations to deal with any situation where APRA may require
information for prudential purposes that may be misleading if it is
calculated in the same way when disclosed to members.
3.61 ASIC will be the responsible regulator for this new provision in
the SIS Act. Failure to provide information calculated on the same basis
will be an offence of strict liability carrying a penalty of 50 penalty units.
Inconsistent information provided through multiple means can cause
significant damage to members of superannuation funds and inhibit
informed decision-making. Superannuation is a compulsory system of
retirement savings, therefore, it is appropriate that RSE licensees do
everything that they can reasonably do to ensure that there is complete
transparency on the financial products members have an equitable interest
in. However, recognising that this obligation will extend to a wide range
of information provided to many individuals, a lower penalty will apply
compared to other disclosure-related offences. [Schedule 3, item 42,
subsections 29QC(2) and (3) and Schedule 3, item 39, subparagraph 6(1)(c)(ia)]
Portfolio holdings
Trustees must publish details of portfolio holdings
3.62 RSE licensees will have an obligation to make publicly available
the details of their portfolio holdings twice annually as at each reporting
day, which will be 30 June and 31 December each year, by publishing this
45
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
information on the fund's website within 90 days. [Schedule 3, item 8, section
1017BB]
3.63 The details published must cover information sufficient to
identify each financial product or other property, and the value of the
RSE's investment in each financial product or other property. The
regulations may prescribe the format in which the information must be
published. [Schedule 3, item 8, subsections 1017BB(1) and (3)]
3.64 For example, the fund website must list each share held by the
RSE, or held by another party for the ultimate benefit of the RSE, the
number of shares held and the price of each share at the end of the
reporting day.
3.65 The portfolio holdings information must remain on the fund
website until updated with information from the next reporting day. The
fund's website will, therefore, always contain details of the RSE's
portfolio holdings that relate to the most recent reporting day. [Schedule 3,
item 8, subsection 1017BB(2)]
3.66 The RSE licensee is not required to publish information relating
to financial products or other property which is not acquired in this
jurisdiction unless the RSE licensee knew, or reasonably ought to know,
information sufficient to identify the financial products or other property
acquired. For example, an RSE licensee may use an offshore custodian to
acquire assets in the United States of America. However, the custodian
will not be subject to these requirements as they are not based in
Australia. However, as the custodian only invests at the direction of the
RSE licensee, then the RSE licensee itself will have the knowledge of the
financial products or other property acquired and it will still have to
publish this information on the fund's website.
3.67 The regulations will be able to prescribe a materiality threshold
for the information that must be published on an RSE licensee's website.
The Government will give consideration to prescribing a threshold to
strike a balance between the compliance costs and the benefits for
members from portfolio holdings disclosure. In the absence of any
regulations being made, the legislation requires that all portfolio holdings
must be disclosed subject to the holding being acquired in Australia.
3.68 The publishing requirement extends to financial products in
which `assets derived from assets' of the RSE are invested. The concept
of `assets derived from assets' is intended to capture situations where
assets are invested through intermediaries; for example, where assets are
invested through fund of funds structures such as multiple levels of pooled
investments, including managed investment schemes.
46
Collection and disclosure of information
3.69 In other words, an RSE licensee may invest and in return acquire
an interest in an entity. That entity may then in turn use the assets
contributed by the RSE, or perhaps part of those assets, pooled with the
assets contributed by other investors, to invest and in return acquire an
interest in a third party. At the point that the pooled assets are invested by
the entity in the third party they are `assets derived from assets' of the
RSE. To avoid confusion, the term is not intended to refer to derivative
products, such as contracts for difference. This may, in fact, be an asset of
the RSE. [Schedule 3, item 8, paragraphs 1017BB(1)(a) and (b)]
Other parties must provide relevant information to the RSE licensee
3.70 To enable an RSE licensee to obtain the required information for
disclosure of their portfolio holdings, obligations will be imposed on
parties to contracts and arrangements that acquire a financial product
using the assets, or assets derived from the assets, of an RSE.
3.71 Specifically, where a person (the first party) enters into a
contract or other arrangement with another person (the second party), to
acquire a financial product using the assets, or assets derived from assets
of an RSE, or to provide a custodial arrangement then the first party must
notify the second party to that contract or arrangement relates to assets, or
assets derived from assets, of an RSE. [Schedule 3, item 8, subsections
1017BC(1) and (2)]
3.72 The first party must also provide details of the RSE licensee to
the second party. For example, the name of the RSE licensee and a
mailing address to which to send the required information. [Schedule 3, item
8, paragraph 1017BC(2)(b)]
3.73 This requirement will only apply to contracts or arrangements
where assets, or assets derived from assets, of an RSE are subject of the
arrangement and:
· the first party acquires a financial product from a second
party;
· there is an agent of the first party acquiring a financial
product from the second party;
· the second party provides a custodial arrangement to which
the first party is a client; or
· the first party is the provider of a custodial arrangement and
the second party will acquire a financial product for the first
party under that custodial arrangement. [Schedule 3, item 8,
subsection 1017BC(1)]
47
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
3.74 If a financial product is acquired under the contract or
arrangement, the second party will have an obligation to provide the RSE
licensee with information sufficient to identify the financial product
acquired and any financial products or other property that the second party
knows, or reasonably ought to know, will be acquired using the assets, or
assets derived from the assets, of the RSE. [Schedule 3, item 8, subsection
1017BC(3)]
3.75 If no financial product is acquired under a contract or
arrangement that is a custodial arrangement then there will be no
obligation on the second party to provide information, however the second
party providing the custodial arrangement will then be aware that the
investment are assets, or assets derived from assets, of a RSE licensee and
hence will be under an obligation to provide a notice to any other party
that provides it with a custodial arrangement or from whom they acquire a
financial product. For example, where the arrangement is to provide a
custodial arrangement then no information must be provided by the
second party. However, this ensures that the second party is made aware
that the assets that are subject of the arrangement are assets, or assets
derived from assets, of the RSE licensee. If that second party
subsequently enters into a separate arrangement, for which it would be the
first party, to acquire a financial product from another party then it must
provide a separate notice to that other party who would be under an
obligation to provide the relevant information to the RSE licensee so that
it can comply with its obligation to publish portfolio holdings. [Schedule 3,
item 8, sections 1017BD and 1017BE]
3.76 `Custodial arrangement' is defined using an existing definition
in the Corporations Act. This has been generally understood to applying
to platform arrangements that allow members to direct a superannuation
entity to invest in a particular financial product. However, in the context
of these provisions, it will capture traditional custody arrangements that
are provided to RSE licensees by professional custodians as these
arrangements only permit the custodian to invest assets as directed by the
RSE licensee. [Schedule 3, item 8, sections 1017BC, 1017BD and 1017BE]
3.77 In some circumstances, a professional custodian may only
acquire other property on behalf of the RSE licensee. In this case, the
custodian may not meet the definition of custodial arrangement in the
Corporations Act. However, in this case, the custodian is acquiring the
other property at the direction of the RSE licensee which means the RSE
licensee should already have information regarding the other property
acquired, and therefore this must be published on the RSE licensee's
website.
48
Collection and disclosure of information
3.78 These requirements may apply to several contracts or
arrangements that invest the assets, or assets derived from the assets, of an
RSE licensee through several parties as set out in example 3.2.
Example 3.2
An RSE licensee (ABC Super) invests assets of their fund through a
custodian. The custodian must invest as directed by ABC Super. The
custodian, at the direction of ABC Super, invests assets in a financial
product provided by Managed Investment scheme 1.
Managed Investment Scheme 1 makes investments into other managed
investment schemes. It is a fund of funds.
Managed Investment Scheme 1 invests in a financial product offered
by Managed Investment Scheme 2 by purchasing units in that scheme.
In this example, ABC Super must notify the custodian the assets are
those of ABC Super.
The custodian must then notify Managed Investment Scheme 1 that the
assets invested are those of ABC Super as it is an investment in a
financial product. Managed Investment Scheme 1 will have an
obligation to provide information to ABC Super that is sufficient to
identify its financial product, the financial products it acquires with the
assets and other property that it acquires with the assets as well as the
value of ABC Super's investment in each of these things.
Managed Investment Scheme 1 must subsequently notify Managed
Investment Scheme 2 that it is investing assets derived from the assets
of ABC Super as it is investing in another financial product.
Therefore, Managed Investment Scheme 2 will also have an obligation
to provide information directly to ABC Super that is sufficient to
identify its financial product, the financial products it acquires with the
assets and other property that it acquires with the assets as well as the
value of ABC Super's investment in each of these things.
The steps involved are set out in Diagram 3.3.
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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Diagram 3.3
ABC Super
Custodian
Providing the Investment of
required assets that require
information notification
Managed investment
scheme 1
Managed Investment
Scheme 2
3.79 These obligations will only apply to contracts or arrangements
entered into from the day of Royal Assent. [Schedule 3, item 22, section 1541]
3.80 Regulations will be able to prescribe certain contracts and
arrangements to which the obligation to provide a notice does not apply.
For example, regulations may be used to exclude contracts and
arrangements where the first party will already be required to provide
information on the financial product that will be acquired as they will
always know, or reasonably ought to know, information sufficient to
identify the financial product and the value of assets attributable to the
RSE licensee that is invested in the financial product.
3.81 Parties entering into contracts or arrangements which cover
assets of an RSE, or assets derived from assets, of an RSE, who have not
been notified that the contract or arrangement covers such assets, or the
details of the RSE licensee, will not be required to provide the necessary
information. [Schedule 3, item 8, subsections 1017BC(2) and (3)]
Offences relating to publication of information
3.82 RSE licensees who fail to publish the details of their portfolio
holdings on the fund's website commit an offence with a penalty of 100
penalty units or imprisonment for 2 years, or both. It is a defence to show
that the RSE licensee would have published the information, but for the
fact that the trustee was not provided with the required information. That
50
Collection and disclosure of information
is, it is a defence to show that the details of an RSE's portfolio holdings
were not published because the information was not provided. [Schedule 3,
item 14, subsections 1021NB(1) and (5)]
3.83 There will be a separate defence for an RSE licensee who omits
information where the information would have been published except for
the fact that the information was not provided because the requirement for
another party to provide the relevant information did not apply because
the contract or arrangements was entered into prior to the day of Royal
Assent. [Schedule 3, item 22, subsection 1541(3)]
3.84 RSE licensees who knowingly publish misleading or deceptive
information, or information containing omissions, commit an offence.
This offence carries a penalty of 200 penalty units or imprisonment for 5
years, or both. [Schedule 3, item 14, subsection 1021NB(2)]
3.85 A corresponding strict liability offence exists for where the RSE
licensee knew or did not know whether the information was misleading or
deceptive or contained an omission. This offence carries a penalty of 100
penalty units or imprisonment for 2 years, or both. [Schedule 3, item 14,
subsection 1021NB(3)]
3.86 A strict liability offence is necessary to ensure effective
enforcement of these provisions by ASIC. Superannuation is a
compulsory system of retirement savings, therefore, it is appropriate that
RSE licensees do everything that they can reasonably do to ensure that
there is complete transparency on the financial products members have an
equitable interest in.
3.87 However, where portfolio holdings information is published that
contains an omission, it is a defence to show that a trustee took reasonable
steps to ensure there would not be an omission, or that necessary
information to meet the requirement was not provided to the RSE licensee
by other parties or that the information was omitted because it would have
been misleading and deceptive and a trustee took reasonable steps to
obtain information that would not have been misleading or deceptive.
[Schedule 3, item 14, subsection 1021NB(6)]
3.88 An additional defence exists solely for the strict liability offence
in relation to publishing misleading or deceptive information, where the
RSE licensee took reasonable steps to ensure that the information
published would not be misleading or deceptive. [Schedule 3, item 14,
subsection 1021NB(7)]
Offences relating to requirements to provide relevant information
3.89 Parties who do not notify another party that a contract or
arrangement invests assets of an RSE, or assets derived from the assets of
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
an RSE, or who fail to notify other parties of the details of the RSE
licensee commit an offence. This offence carries a penalty of 100 penalty
units or imprisonment for 2 years, or both. [Schedule 3, item 14, subsection
1021NC(1)]
3.90 A party to a contract or arrangement who invests assets of an
RSE, or assets derived from assets of an RSE, and who is notified by the
investing party but who fails to provide the relevant information to the
RSE licensee commits an offence. This offence also carries a penalty of
100 penalty units or imprisonment for 2 years, or both. [Schedule 3, item 14,
subsection 1021NC(2)]
3.91 Parties commit an offence when they knowingly omit, or
knowingly provide misleading or deceptive, information when either:
notifying another party that a contract or arrangement invests assets, or
assets derived from assets, of an RSE, or notifying another party of the
details of the trustee, or who have been so notified and do not provide the
relevant information to the RSE licensee. This offence carries a penalty
of 200 penalty units or imprisonment for 5 years, or both. [Schedule 3, item
14, subsection 1021NC(3)]
3.92 A corresponding strict liability offence exists for whether or not
the person knew the information provided was misleading or deceptive or
omitted information. This offence carries a penalty of 100 penalty units
or imprisonment for 2 years, or both. [Schedule 3, item 14, subsections
1021NC(4) and (5)]
3.93 A strict liability offence is necessary to ensure effective
enforcement of this provisions by ASIC. Superannuation is a compulsory
system of retirement savings, therefore, it is appropriate that RSE
licensees do everything that they can reasonably do to ensure that there is
complete transparency on the financial products members have an
equitable interest in.
3.94 Where a person has committed an offence by omitting to
provide relevant information to the RSE licensee, it is a defence to show
that the person took reasonable steps to ensure there would not be an
omission in providing the information. In the alternative, it is a defence to
show that the information was omitted because it would have been
misleading or deceptive, and that the person took reasonable steps to
obtain information that would not have been misleading or deceptive.
[Schedule 3, item 14, subsection 1021NC(6)]
3.95 Where a person has committed an offence because that person
provided misleading or deceptive information to the RSE licensee under
these provisions, it is a defence to the strict liability offence only that the
person took reasonable steps to ensure the information provided would not
be misleading or deceptive. [Schedule 3, item 14, subsection 1021NC(7)]
52
Collection and disclosure of information
Application and transitional provisions
3.96 A consultation undertaken in respect of the existing section 57
of the FSCOD Act will be valid for the purposes of APRA making a
determination for the amended section 57. Representations made by
interested parties also are valid for the amended section 57. [Schedule 3,
item 45]
3.97 The requirement for RSE licensees to provide APRA with
information through an implied term in contracts will apply to both new
and existing contracts. The exception to this where the contract was
entered into before the commencement of the Bill and the disclosure of
this information would result in an acquisition of property on unjust terms.
If there is an acquisition of property on unjust terms then the RSE is not
required to comply with the reporting standard to the extent that it relates
to this information. [Schedule 3, item 46]
3.98 APRA will be able to publish quarterly data on MySuper
products beginning on 1 July 2013. [Schedule 3, item 47]
3.99 The obligation to publish a product dashboard for a MySuper
product will apply from 1 July 2013. The obligation to publish a product
dashboard for an investment option of a choice product will apply from
1 July 2014. The longer lead in time for choice products is due to the
more complex nature of some choice products. [Schedule 3, item 22, section
1539]
Consequential provisions
3.100 Section 601TAA of the Corporations Act provides that a
licensed trustee company must publish an up-to-date schedule of fees on
their website. This section is amended to avoid any doubt that may be
created by the requirement to make certain information publicly available
on an RSE licensee's website that a fee schedule published by a licensed
trustee company must also be publicly available on their website.
3.101 The offences applying to RSE licensees for the product
dashboard and the disclosure of portfolio holdings are added to section
38A of the SIS Act which defines `regulatory provision' for the purpose
of specifying that contravention of a regulatory provision may result in a
notice by the relevant regulator that removes complying fund status.
53
Chapter 4
Modern awards and enterprise
agreements
Outline of chapter
4.1 This chapter explains amendments to the FW Act relating to the
nomination of default superannuation funds in modern awards and
enterprise agreements. The amendments generally provide that only funds
offering a MySuper product can be included in modern awards and
enterprise agreements.
Context of amendments
4.2 From 1 January 2014, employers will generally only be able to
avoid penalties under the choice of fund provisions in the SG Act by
making superannuation contributions, on behalf of those employees who
have not chosen their fund, to a superannuation fund that is authorised to
offer a MySuper product.
4.3 Most modern awards specify a particular fund or funds to which
employers must make compulsory superannuation contributions for the
benefit of employees covered by the award who have not chosen a fund
(`default funds'). A failure to make contributions for such employees to a
default fund listed in the award constitutes a contravention of the award,
exposing the employer to penalties under the FW Act.
4.4 These amendments introduce a new requirement that default
funds listed in modern awards (other than exempt public sector
superannuation schemes) must be authorised to offer a MySuper product.
This requirement is intended to ensure that the new MySuper
requirements under the SG Act do not result in employers being required
to make compulsory superannuation contributions twice, because they are
required to comply with both the terms of the modern award and the SG
Act. Otherwise, employers could be required to make contributions to a
fund that offers a MySuper product in order to satisfy their superannuation
guarantee obligation under the SG Act, and to make contributions to a
default fund listed in a modern award that does not offer a MySuper
product in order to comply with the award.
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4.5 Enterprise agreements can also nominate a fund to which an
employer must make compulsory superannuation contributions for the
benefit of employees who are covered by the agreement. In the case of
enterprise agreements, generally the nominated fund is effectively the
`chosen' fund for all employees covered by the agreement. The SG Act
exempts the employer from providing those employees with a standard
choice form. An employee who did not support that fund being included
in the enterprise agreement, or who joined the employer after the
enterprise agreement was made, will have their superannuation
contributions sent to the nominated fund. However, an enterprise
agreement may also nominate a fund as a default fund, while still allowing
employees to choose a different fund.
4.6 An enterprise agreement covers all the employees engaged to
perform work covered by the agreement, including those who did not vote
in favour of the agreement or who were not employed at the time the
agreement was approved. It is intended that, in general, these employees
should have their superannuation contributions made to a fund that offers
a MySuper product.
Summary of new law
4.7 Modern awards will generally only be permitted to nominate a
fund that offers a MySuper product as a `default fund' (that is a fund to
which employers are to make compulsory contributions for employees
that do not have a chosen fund).
4.8 An exception to this rule is that an `exempt public sector
superannuation scheme', within the meaning given by the SIS Act, will
also be permitted to be included as a default fund in a modern award.
Exempt public sector superannuation schemes are not regulated by APRA
and will not be able to offer MySuper products.
4.9 A term of a modern award will be invalid to the extent that it
does not comply with this requirement.
4.10 Despite a term of a modern award being invalid to the extent
that it nominates a non-compliant default fund, such terms may remain in
the text of a modern award and cause confusion for employers and
employees. For this reason, FWA will be required to conduct a `one-off'
process to ensure, as far as possible, that on 1 January 2014 modern
awards do not purport to nominate any default funds that do not comply
with the new requirement.
56
Modern awards and enterprise agreements
4.11 There will also be an ongoing obligation on FWA to remove any
invalid references to non-compliant funds in modern awards `as soon as
practicable' after receiving a written notification from APRA that a fund
has ceased to offer any MySuper product or that a fund has ceased to be
an exempt public sector superannuation scheme and does not offer a
MySuper product.
4.12 FWA will be required to include a new term in modern awards
that permits employers to make contributions to a fund for an employee
who is a defined benefit member of that fund. This will allow
contributions to defined benefit schemes even if the fund is not specified
in the modern award and does not offer a MySuper product.
4.13 Under the SG Act, contributions made to superannuation funds
in accordance with the terms of certain industrial instruments are deemed
to comply with the choice of fund requirements. Contributions made
under two further types of award-based transitional instrument, made
under the former federal workplace relations system, will be deemed
compliant with the choice of fund requirements. The effect of these
amendments is that funds listed in any such instruments that remain in
operation on 1 January 2014 will not be required to offer a MySuper
product. The FW Act will also be amended to provide that an enterprise
agreement approved by FWA on or after 1 January 2014 will only be able
to nominate a default fund (or scheme) that is either:
· a fund that offers a MySuper product;
· a fund that only receives contributions in respect of
employees of the relevant employer who have not chosen a
fund if such employees are defined benefit members; or
· an exempt public sector superannuation scheme.
4.14 A term of an enterprise agreement will be an unlawful term and
of no effect to the extent that it nominates a default fund that does not
comply with this requirement.
Comparison of key features of new law and current law
New law Current law
From 1 January 2014, a term of a The FW Act currently
modern award cannot nominate a default provides that modern awards
fund, unless the fund: may include terms about
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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New law Current law
superannuation (s 139(1)(i) of
a) offers a MySuper
the FW Act).
product; or
Modern awards generally
b) is an `exempt public
provide that where an
sector superannuation
employee has not chosen a
scheme'.
superannuation fund,
A term of a modern award has no effect employers are required to pay
to the extent that it does not comply with compulsory contributions into
this requirement. a default fund listed in the
award (or a default fund or
successor fund which the
employer was making
contributions to before 12
September 2008, provided the
fund is an eligible choice
fund).
FWA must conduct a `one-off' process Under the FW Act, while
to ensure that on 1 January 2014, terms that are not permitted to
modern awards do not include terms be included in modern awards
providing for superannuation have no effect (s 137), there
contributions to be made to a are no specific provisions
non-compliant default fund. requiring FWA to remove any
such terms from the face of
While terms of this nature would have modern awards.
no effect, this process will ensure that
such terms are not included on the face However, there are a range of
of modern awards on 1 January 2014. existing mechanisms allowing
modern awards to be reviewed
There will also be an ongoing obligation or varied which could be used
on FWA to remove any invalid for this purpose (ss 156-158
references in modern awards to a and 160 of the FW Act). It is
non-compliant fund `as soon as intended that these provisions
reasonably practicable' after receiving a could be relied upon to remove
notification from APRA that the fund any references in modern
has ceased to be compliant. awards to a default fund that
ceases to be compliant with
the new requirements on or
after 1 January 2014.
From 1 January 2014, modern awards There is currently no
must include a new term that permits an requirement in the FW Act to
employer to make contributions to a include a term in modern
superannuation fund or scheme for awards in relation to
58
Modern awards and enterprise agreements
New law Current law
default fund employees who are superannuation contributions.
`defined benefit members'.
The new term will allow employers to
continue to make contributions to funds
for `defined benefit members',
regardless of whether the fund offers a
MySuper product.
Enterprise agreements approved by Enterprise agreements may
FWA on or after 1 January 2014 are not include terms dealing with
permitted to nominate a default fund for superannuation but are not
employees covered by the agreement required to do so (s 172 FW
unless the fund: Act).
a) offers a MySuper product; If an enterprise agreement
nominates a superannuation
b) only receives contributions in fund, that fund is deemed to
respect of employees of the comply with the choice of
relevant employer who have not fund requirements in the SG
chosen a fund if such employees Act, provided the fund is an
are `defined benefit members'; `eligible choice fund'.
or
c) is an `exempt public sector
superannuation scheme'.
A term of an enterprise agreement will
be an unlawful term and will be of no
effect to the extent that it does not
comply with these criteria.
Contributions under two further The SG Act currently deems
award-based transitional instruments are contributions made under
deemed to be compliant with the choice certain award and
of fund requirements under the SG Act. agreement-based transitional
Default funds listed in these instruments instruments to be compliant
will therefore not be required to offer a with the choice of fund
`MySuper product' or otherwise comply requirements. These
with the new requirement. instruments include, for
example, pre-reform certified
The relevant instruments are `awards' agreements, Australian
(often referred to as `pre-reform federal Workplace Agreements,
awards') and `State reference workplace determinations and
transitional awards or common rules'. Division 2B State instruments.
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
New law Current law
These industrial instruments were made Contributions made in
under the former federal workplace accordance with `notional
relations system before being preserved agreements preserving State
for a limited duration by item 2 of awards' are also deemed
Schedule 3 to the TPCA Act. compliant with the choice of
fund requirements if the
While the majority of these instruments contributions were made in
have been terminated, there may be respect of salary or wages paid
some residual instruments that continue before 1 July 2006.
to operate on 1 January 2014, when the
MySuper requirements commence. Because contributions made
under these instruments are
deemed compliant with the
choice of fund requirements,
such contributions will not be
required to be made to a fund
that offers a MySuper product.
Detailed explanation of new law
4.15 A definition of the term `default fund employee' will be inserted
into the FW Act. `Default fund employees' are employees who have no
chosen fund within the meaning of the SG Act. Definitions of the terms
`defined benefit member', `exempt public sector superannuation scheme'
and `MySuper product' will also be inserted into the FW Act as they are
relevant to interpreting these amendments. The terms are to take the
meaning ascribed to them by relevant superannuation legislation.
[Schedule 4, items 1, 2, 3 and 4, section 12].
4.16 Modern awards must not include a term that requires or permits
contributions to be made to a superannuation fund for the benefit of an
employee who has no chosen fund (that is a `default fund employee'),
unless the fund:
· offers a MySuper product; or
· is an exempt public sector superannuation scheme.
[Schedule 4, item 6, subsection 155A(1)].
4.17 Allowing exempt public sector superannuation schemes to be
named as default funds in modern awards is required because such funds
or schemes are not regulated by APRA and therefore cannot be authorised
to offer a MySuper product. [Schedule 4, item 6, paragraph 155A(1)(b)].
60
Modern awards and enterprise agreements
4.18 The requirement that default funds in modern awards offer a
MySuper product or be an exempt public sector superannuation scheme
will apply to both existing modern awards and any new modern awards
from 1 January 2014. [Schedule 4, item 8, schedule 1, clause 9].
4.19 Section 137 of the FW Act will operate so that a term of a
modern award will have no effect to the extent that it does not comply
with the new requirement. For example, if the authorisation of a fund to
offer a MySuper product is cancelled and the fund is not an exempt public
sector superannuation scheme, a term in a modern award will be invalid to
the extent that it nominates that fund as a default fund from the time of the
cancellation. This will ensure that employers are not exposed to
double-jeopardy in circumstances where a default fund listed in a modern
award ceases to comply with these criteria. Employers should not be
obligated to make contributions to a fund under the terms of a modern
award when they would be subject to penalties under the SG Act for doing
so. [Schedule 4, item 6, subsection 155A(1)].
4.20 The new requirement only applies to terms in modern awards
that specify a particular superannuation fund as a default fund. A term of
a modern award will still have effect if it requires or permits
superannuation contributions to a class of fund but does not specify a
particular fund. For example, most modern awards include a grandfather
clause that permits an employer to make contributions to a fund that the
employer was contributing to before 12 September 2008, provided the
fund is an eligible choice fund. Although this term would notionally
permit contributions to a fund that does not meet the new requirement, the
term would still have effect because it does not specify a particular fund.
However, contributions to a default fund made in reliance on the
grandfather clause would not meet the requirements of the SG Act if the
contributions are not made to a fund that offers a MySuper product or an
exempt public sector superannuation scheme, and the contributions are not
made for a defined benefit member.
4.21 FWA must conduct a `one-off' process to ensure that on
1 January 2014, modern awards do not include any terms that fail to
comply with the new requirement for default funds. [Schedule 4, item 8,
clause 11].
4.22 While any such terms would have no effect as a result of section
137 of the FW Act, this process will ensure that they are not included on
the face of a modern award in order to avoid confusion for employers and
employees.
4.23 FWA will be required to ensure that by 1 January 2014, the text
of each modern award does not include any term to the extent that it
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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contravenes the new requirement for default funds in the following
circumstances:
· the award was made before 1 January 2014;
· the award was in operation on 1 January 2014; and
· immediately before 1 January 2014, the award included a
term that would not have complied with the new requirement.
[Schedule 4, item 8, clause 11].
4.24 For example, FWA would be required to remove a reference to
one default fund from a modern award by 1 January 2014 in the following
circumstances:
· On 31 December 2013 a modern award includes a term
permitting superannuation contributions to be made in
respect of employees with no chosen fund to four different
funds.
· One of the funds does not, at this time, comply with the new
requirement for default funds because the fund is not
authorised to offer a MySuper product and is not an exempt
public sector superannuation scheme.
[Schedule 4, item 8, clause 11].
4.25 Where a default fund listed in a modern award ceases to comply
with the new requirement that such funds either offer a MySuper product
or be an exempt public sector superannuation scheme on or after
1 January 2014, the `one-off' process will not apply. Instead, FWA will
be compelled to ensure that modern awards do not include any invalid
references to a non-compliant fund after receiving a notification from
APRA concerning the fund.
4.26 If APRA cancels the authorisation of a fund to offer a MySuper
product and the fund is not authorised to offer any other MySuper
product, APRA will be required to notify FWA in writing. In addition, if
APRA becomes aware that a fund ceases to be an exempt public sector
superannuation scheme and is not authorised to offer a MySuper product
APRA must notify FWA in writing of that fact. [Schedule 4, items 11, section
29U and item 12, section 29XC]
4.27 If FWA receives a notice in writing from APRA that a fund is no
longer authorised to offer any MySuper product or has ceased to be an
exempt public sector superannuation scheme and is not authorised to offer
a MySuper product, then FWA must ensure that the text of the modern
62
Modern awards and enterprise agreements
award is updated to remove any invalid references to the fund as soon as
reasonably practicable after receiving the notice. It is intended that
invalid references to non-compliant funds be removed quickly in order to
avoid confusion for employers and employees. [Schedule 4, item 6,
subsections 155A(2)-(5)].
4.28 While FWA is required to remove any invalid references in
modern awards to a non-compliant fund in modern awards after receiving
a notification concerning the fund from APRA, FWA may also vary
modern awards to remove non-compliant default funds at any time, using
one of the existing variation mechanisms in the FW Act:
· an ongoing system of four yearly reviews of modern awards,
the first of which will occur in 2014;
· variations to modern awards, either on application or on
FWA's own motion, where FWA considers the variation
necessary to achieve the modern awards objective.
Applications to vary modern awards under section 157 of the
FW Act can be made by an employee or employer covered
by the modern award, or by an organisation entitlement to
represent their industrial interests; and
· variations to modern awards, either on application by a party
to the award, or on its own initiative, to remove an ambiguity
or uncertainty, or to correct an error.
4.29 Each modern award must include a new term that permits an
employer to make contributions to a superannuation fund or scheme for
employees that do not have a chosen fund if the employee is a `defined
benefit member' of the fund or scheme. [Schedule 4, item 5, section 149A].
4.30 The new mandatory term to be included in modern awards will
ensure consistency with the amendments in Schedule 5 to the Bill, which
allow employers to continue to make default contributions to funds for
defined benefit members, regardless of whether that fund offers a
MySuper product. The mandatory term in modern awards will comply
with the new requirement in section 155A of the FW Act because it would
not specify any particular fund.
4.31 The requirement that modern awards include the mandatory
term will apply to both existing modern awards and any new modern
awards from 1 January 2014. [Schedule 4, item 8, schedule 1, clause 9].
4.32 FWA is required to amend existing modern awards to ensure
that they include the new mandatory term by 1 January 2014. [Schedule 4,
item 8, Schedule 1, clause 10]
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4.33 A term of an enterprise agreement that requires or permits
superannuation contributions to be made to a specified fund for the benefit
of a default fund employee is an unlawful term, unless:
· the fund offers a MySuper product;
· all `default fund employees' in relation to whom
contributions are being made to the fund or scheme by the
relevant employer are `defined benefit members'; or
· the fund is an exempt public sector superannuation scheme.
[Schedule 4, item 8, paragraph 194(h)].
4.34 This requirement will apply to enterprise agreements that are
approved by FWA on or after 1 January 2014. Therefore, a term that
nominates a fund in an enterprise agreement approved by FWA before
1 January 2014 that does not meet the criteria will remain a lawful term.
[Schedule 4, item 8, clause 12]
4.35 Under section 253 of the FW Act, a term of an enterprise
agreement has no effect to the extent that it is an unlawful term.
4.36 FWA can only approve an enterprise agreement once satisfied
that it does not contain any unlawful terms under subsection 186(4) of the
FW Act. FWA can accept undertakings from an employer to address
concerns about the inclusion of unlawful terms in an enterprise agreement.
[Schedule 4, item 8, clause 8].
4.37 To ensure that an RSE licensee may accept contributions for
employees that do not have a chosen fund under enterprise agreements
and have not asked their contributions to be directed to a specified choice
product, section 29WA of the MySuper Core Provisions Bill will not
apply to contributions made in accordance with an enterprise agreement
approved before 1 January 2014, even though the fund specified does not
meet one of the criteria. [Schedule 4, item 13].
4.38 Contributions made to default funds nominated in two types of
award-based transitional instruments will be deemed compliant with the
choice of fund requirements in the SG Act. The effect of this amendment
is that a contribution to a fund by an employer for the benefit of an
employee is deemed to have been made in compliance with the choice of
fund requirements if the contribution, or a part of the contribution, is made
under or in accordance with such instruments. Such contributions will
therefore not have to be made to a MySuper product. [Schedule 4, item 9,
subsection 12A(1) and Schedule 4, item 10, subsection 32C(6)].
64
Modern awards and enterprise agreements
4.39 The relevant instruments are `awards' (often referred to as
`pre-reform federal awards') and State reference transitional awards or
common rules. These instruments were made under the former federal
workplace relations system and have since been preserved as transitional
instruments under Schedule 3 to the TPCA Act. [Schedule 4, item 9,
subsection 12A(1) and Schedule 4, item 10, subsection 32C(6)].
4.40 While the majority of these transitional instruments have now
been terminated, there may be some residual instruments that continue to
operate for a limited period on or after 1 January 2014.
65
Chapter 5 Defined benefit members
Outline of chapter
5.1 This chapter explains amendments that will: allow for defined
benefit arrangements to be used by an employer as a default fund
regardless of whether the fund offers a MySuper product; and which
exclude defined benefit members from the 500 employees for which an
employer must contribute to the fund to qualify for a separate MySuper
product.
Context of amendments
5.2 Defined benefit funds and schemes provide members with a
specified benefit on retirement that is calculated by a formula or other
process.
5.3 Defined benefit members are entitled, in whole or in part, to a
specified benefit on retirement that is calculated by reference to their
salary or a specified amount regardless of investment earnings or costs
incurred by the fund. If the accumulated amount in the fund is insufficient
to meet the specified benefit, in most cases, this shortfall will be met by
the contributing employer. The member's defined retirement benefit will
not usually be exposed to investment risk.
5.4 A defined contribution fund will provide a member with the
accumulated amount, of contributions and investment earnings, when
withdrawn by the member. The member bears the investment risk on
their retirement benefit.
5.5 The MySuper regime will lift standards in relation to defined
contribution products that are provided as the default option of a
superannuation fund. In particular, it will ensure that there will be certain
rules for charging of fees, additional duties for trustees and that an
appropriate investment strategy is adopted in relation to members who do
not make active choices.
5.6 In contrast, defined benefit members will be entitled to a benefit
that is not altered by the charging of fees or the investment strategy
adopted. Therefore, the MySuper regime is not designed to apply to
defined benefit arrangements.
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Summary of new law
5.7 Defined benefit funds and schemes will be able to continue to be
used by employers for the contributions of employees that do not have a
chosen fund.
5.8 An exemption will apply to the requirement that employers must
make contributions to a fund that offers a MySuper product for an
employee that does not have a chosen fund for any employee that is a
defined benefit member of the fund to which the employer is contributing.
5.9 An exemption will also apply, in respect of defined benefit
members, to the trustee's obligation to pay contributions into a MySuper
product for members that have not given the trustee an election in writing
that their contributions are to be paid into a specified choice product.
5.10 This will apply to any contribution on behalf of a defined benefit
member whether it supports the defined benefits of the member or is held
on a defined contribution basis.
5.11 Defined benefit members will not be able to be counted in
working out whether an employer contributes to the fund for 500 or more
employees and hence qualifies the trustee of that fund to apply for
authorisation of a MySuper product that is open to the employees of that
employer.
Comparison of key features of new law and current law
New law Current law
Employers may make contributions The MySuper Core Provisions Bill
to a fund for employees that do not will require employers to make
have a chosen fund but are a contributions for employees that do
defined benefit member of that not have a chosen fund to a fund
fund regardless of whether it offers that offers a MySuper product.
a MySuper product.
Defined benefit members will not The MySuper Core Provisions Bill
be able to be counted in working allows any employee that the
out whether an employer is a large employer contributes to the fund for
employer for the purposes of to be counted in working out
authorisation of a MySuper product whether an employer is a large
under section 29TB of the employer for the purposes of
MySuper Core Provisions Bill. authorisation of a MySuper product
under section 29TB.
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Defined benefit members
Detailed explanation of new law
5.12 Employers will be able to make contributions for employees that
do not have a chosen fund to a fund that provides defined benefits to that
employee, even if that fund does not offer a MySuper product provided it
meets the other requirements in subsection 32C(2) of the SG Act (for
example, the fund must be an eligible choice fund for the employee). In
effect, this maintains the current operation of the SG Act in respect of
contributions for employees that are defined benefit members of a
superannuation fund. [Schedule 5, item 3, subsection 19(2CA)]
5.13 For these purposes, a defined benefit member is a member who
is entitled to a benefit on retirement that is defined, wholly or in part, by
reference to the member's salary at the date of retirement, an earlier date
or averaged over a period before retirement, or is defined as a specified
amount. This definition, therefore, excludes a member who is entitled to a
specified benefit upon termination of employment but is not entitled to a
defined benefit or who is entitled to a specified amount upon realisation of
a risk such as death or permanent disability. These members must have
contributions made to a MySuper product for the accumulation benefits
they will receive on retirement.
5.14 The MySuper Core Provisions Bill requires trustees to pay a
contribution into a MySuper product unless the member has elected that it
be paid into a specified choice product. The requirement will now
exclude contributions made on behalf of a defined benefit member.
Therefore, trustees will not be limited to which product they pay
contributions to for defined benefit members. Contributions that support
the defined benefit can be made to the pool supporting those defined
benefits. Contributions that are to be held on an accumulation basis can
be made to either a MySuper product or a choice product in the fund.
This permits trustees to hold accumulation contributions for defined
benefit members outside of the MySuper regime. [Schedule 5, item 10,
paragraph 29WA(1)(a)]
5.15 A defined benefit member may have an accumulation interest in
connection with their defined benefit interest. It will often be appropriate
for the fees, services and investment strategy for accumulation benefits of
a defined benefit member to be treated differently to the benefits of
members that only have accumulation benefits. For example, the fees
charged to a defined benefit member may be paid out of the pool held to
support the defined benefits. Therefore, this may permit the trustee to
charge a lower fee on the accumulation amount of a defined benefit
member than they would otherwise have to charge on a balance in a
MySuper product. Therefore, as MySuper products must charge members
the same fees (except in limited circumstances), trustees will be allowed
to pay accumulation contributions of defined benefit members into a
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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product that is best suited to the member and has an appropriate fee
structure, services and investment strategy to complement these members'
entitlements to a defined benefit.
5.16 The MySuper Core Provisions Bill allows for a trustee to apply
for authorisation in respect of a MySuper product to be established for the
benefit of the employees of a particular employer if that employer
contributes to the fund for 500 or more employees. This will be amended
to exclude defined benefit members from the employees that are counted
in working out whether an employer qualifies. Defined benefit members
will generally not have any contributions held within a MySuper product,
and therefore, should not be counted for the purposes of working out
whether an employer can be offered a separate MySuper product.
[Schedule 5, item 7, subparagraph 29TB(1)(d)(i) and Schedule 5, item 6, subparagraph
29TB(1)(d)(ii)]
5.17 A power to make regulations will allow for regulations to
prescribe whether a member of a superannuation fund is, or is not, a
defined benefit member for the purpose of certain provisions of the SG
Act or the SIS Act to ensure that these exemptions apply in the intended
circumstances. [Schedule 5, item 2, section 6AA and Schedule 5, item 4, subsection
10(1A)]
5.18 Firstly, regulations may prescribe circumstances in which a
member of a fund is not a defined benefit member. For example, the
exemption is primarily intended to deal with members for whom a
significant proportion of their retirement benefit is specified by reference
to salary or is a specified amount. It is not intended to allow trustees to
avoid the requirement to place contributions into a MySuper product by
having a defined benefit that is an insignificant specified amount, such as
$100 paid on retirement, for a class of members. In these circumstances,
regulations could be made to ensure that members in this type of
arrangement are not excluded from the protections of MySuper.
5.19 Secondly, regulations may prescribe circumstances in which a
member of a superannuation fund who is not otherwise a defined benefit
member is taken to be a defined benefit member. This will be used to
ensure that where public sector employees have interests in two
superannuation entities, one of which is a fully unfunded scheme that
provides a defined benefit to the member, then the regulations will
prescribe that they are deemed to be a defined benefit member across both
schemes. This is necessary to ensure that the member is not
disadvantaged by having to meet higher costs in a MySuper product
simply because it must be paid into a different scheme than their defined
benefit interest.
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Defined benefit members
5.20 A savings provision will ensure that the existing definition of
defined benefit member in the SIS Regulations continues in force and is
incorporated into the new definition of defined benefit member to be
inserted into subsection 10(1) of the SIS Act. [Schedule 5, item 5]
71
Chapter 6
Transition to MySuper
Outline of chapter
6.1 This chapter explains the requirements for certain existing
member balances to be moved to MySuper products and the transitional
rules applying to these requirements
Context of amendments
6.2 In responding to the Review, the Government noted that existing
default funds will be required to transition to MySuper after an
appropriate period.
6.3 The Government subsequently announced that the trustees of
superannuation funds offering MySuper products will need to transfer
certain existing balances of their members to a MySuper product by
1 July 2017. Trustees that do not seek authorisation to offer a MySuper
product will also be required to transfer certain balances to a MySuper
product in another fund before 1 July 2017.
Summary of new law
6.4 Amendments to the SIS Act will introduce a new concept of an
`accrued default amount'. This concept defines those parts of a member's
interest in a fund which must be moved to a MySuper product. In
essence, these are amounts where a member has not exercised an
investment choice or amounts held in a default investment option of the
fund.
6.5 An application by an RSE licensee to APRA for authorisation to
offer a MySuper product will need to be accompanied by an election to
transfer accrued default amounts held in all funds for which the RSE
licensee is trustee to one or more MySuper products. Where the RSE
licensee fails to give effect to its election, APRA will be able to cancel the
RSE licensee's authority to offer a MySuper product.
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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6.6 Provisions in the SIS Act will apply to this election to require
the transfer of all accrued default amounts to MySuper products so that:
· before 1 July 2017, all accrued default amounts in the fund
must be transferred to an authorised MySuper product
offered by the fund unless the member opts-out in writing;
and
· where a member in the fund is not eligible to hold a MySuper
product in the fund, or where accrued default amounts are
held for members in other funds for which the RSE licensee
is trustee, the RSE licensee must take the action required
under the relevant prudential standard to move these amounts
to a MySuper product before 1 July 2017.
6.7 RSE licensees will also have to make a separate election that
will also require the trustee to take action in accordance with the
prudential standards to transfer amounts held in a MySuper product in
circumstances where authorisation for a MySuper product is subsequently
cancelled.
6.8 To remove impediments to the transfer of accrued default
amounts, any trustee that transfers an accrued default amount in
accordance with these amendments will not have any liability to a
member of their fund in relation to that transfer. In addition, any
governing rules that prevent an accrued default amount from being
transferred will be void.
6.9 The Bill also ensures that APRA is able to make prudential
standards dealing with matters relating to accrued default amounts and
SIS Act matters of a transitional nature relating to the Stronger Super
reforms.
Comparison of key features of new law and current law
New law Current law
Accrued default amounts are The concept of accrued default
defined as amounts in respect of amount is not used in the SIS Act.
which the member has not given a
direction as to the investment
strategy to be followed, other than
any direction to invest in an
investment option that would have
74
Transition to MySuper
New law Current law
been that member's default
investment option.
Certain interests within a fund are
specifically excluded from the
meaning of accrued default
amount.
The requirements for an application RSE licensees will need to apply to
by an RSE licensee for APRA for authorisation to offer a
authorisation to offer a MySuper MySuper product (section 29S,
product include an election by the inserted by the MySuper Core
RSE licensee to transfer accrued Provisions Bill).
default amounts to a MySuper
product unless the member opts-out
in writing.
All RSE licensees will have until There is currently no equivalent in
1 July 2017 to transfer all accrued the SIS Act.
default amounts to a MySuper
product unless the member opts-out
in writing.
An RSE licensee must elect, in This election not currently required
writing and in the approved form, under SIS Act.
to transfer accrued default amounts
held within all funds for which it is
trustee, to a MySuper product by 1
July 2017 unless the member
opts-out in writing (or within 30
days with respect to elections
outside the transitional period).
An RSE licensee will not be There is currently no equivalent in
subject to any liability to a member the SIS Act.
of the fund for an action taken to
give effect to a requirement to
transfer accrued default amounts or
amounts on the cancellation of a
MySuper authorisation.
Any provision of the governing There is currently no equivalent in
rules of a fund that would prevent the SIS Act.
an RSE licensee from giving effect
to a requirement to transfer accrued
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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New law Current law
default amounts, or amounts on the
cancellation of a MySuper
authorisation, is void.
APRA will be able to make Part 3A in the Trustee Obligations
prudential standards dealing with and Prudential Standards Act will
transitional matters. provide APRA with the ability to
make prudential standards in
relation to prudential matters.
Detailed explanation of new law
Amounts to be moved to MySuper products
6.10 Amendments to the SIS Act will introduce a new concept of an
`accrued default amount'. [Schedule 6, item 3, subsection 10(1)]
6.11 The accrued default amount for a member includes an amount
that is attributed to the member of the fund in respect of which the
member has not given a direction as to the investment option in which it is
to be invested. [Schedule 6, item 4, subparagraph 20B(1)(b)(i)]
6.12 The definition of accrued default amounts also includes all
amounts of members that are invested in the investment option that would
have been the default option for the member at the time the assets
attributable to the member were invested. The term therefore captures
amounts where the member has either explicitly or implicitly directed that
the amount be invested in the default investment option for that member.
In this way, members who may have decided to delegate responsibility for
investment decisions to the trustee by choosing the default investment
option will also be placed in a MySuper product. This will also mean
funds will not need to operate duplicate investment options -- one for
MySuper members and one for members wishing to choose the same
investment allocation that applies under MySuper. [Schedule 6, item 4,
subparagraph 20B(1)(b)(ii)]
6.13 The meaning of accrued default amount specifically excludes
certain amounts. These include:
· amounts already attributed to a MySuper product;
· amounts attributed to defined benefit members;
76
Transition to MySuper
· amounts held in an eligible rollover fund;
· amounts that are invested in one or more of the following:
- a capital guaranteed life insurance policy where
the contributions and accumulated earnings
may not be reduced by negative investment
returns or any reduction in the value of assets
in which the policy is invested;
- a life policy providing benefits based solely on
the realisation of a risk, and not related to the
performance of an investment; and
- an investment account contract that is held
solely for the benefit of that member, and
relatives and dependants of that member -- to
cover legacy products such as endowment and
whole of life policies.
· amounts that support the payment of a pension (these cannot
be part of a MySuper product under paragraph 29TC(1)(i) of
the MySuper Core Provisions Bill);
[Schedule 6, item 4, subsections 20B(2), (3) and (4)]
Application to include election to move `accrued default amounts'
6.14 An application by an RSE licensee for authority to offer a
MySuper product will require an election that the RSE licensee will
attribute to a MySuper product each accrued default amount in each fund
for which the RSE licensee is the trustee. [Schedule 6, item 7, section 29SAA]
6.15 An RSE licensee may attribute an amount to a MySuper product
by obtaining authorisation for an existing default investment option as a
MySuper product. In other cases, to attribute an accrued default amount
to a MySuper product will require the amount to be transferred.
6.16 This election must accompany an RSE licensee's application for
authorisation to offer a MySuper product, in writing and in the approved
form. [Schedule 6, item 6, paragraph 29S(2)(f)]
6.17 For accrued default amounts in the fund for which the RSE
licensee has applied for authorisation of a MySuper product, the RSE
licensee will have to transfer the amounts by 1 July 2017 or within 30
days of receiving notice of authority to offer a MySuper product or notice
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
of refusal of authority, whichever is later. [Schedule 6, item 13,
paragraph 387(1)(a)]
6.18 An RSE licensee is not required to transfer an accrued default
amount if the member directs the RSE licensee in writing not to. This
ensures that members have the right to opt-out of having their existing
balance moved to a MySuper product if they wish to. [Schedule 6, item 7,
subparagraph 29SAA(1)(a)(i)]
6.19 The transitional period to 1 July 2017 is given effect to by
applying provisions of the SIS Act that will apply to any election that is
made before 1 July 2017. A transitional period is provided to allow RSE
licensees to prepare for and manage the transfer of accrued default
amounts from existing superannuation arrangements to the new MySuper
environment. [Schedule 6, item 13, section 387]
6.20 Beyond the transitional period, the transfers must be made
within 30 days of receiving notice of authority to offer a MySuper
product, unless otherwise directed by the member. [Schedule 6, item 7,
section 29SAA]
6.21 The RSE licensee will also be required to elect to comply with
relevant prudential standards before the later of 1 July 2017 and 90 days
after notice of authorisation of a MySuper product has been given or
refused in respect of:
· each accrued default amount for a member of the fund who is
not eligible to hold an interest in a MySuper product offered
by the fund; and
· each accrued default amount for members of any regulated
superannuation fund for which the RSE licensee is trustee,
and which does not offer a MySuper product.
[Schedule 6, item 7, paragraph 29SAA(1)(b) and subsection 29SAA(2)]
6.22 It is intended that the prudential standards or the regulations will
similarly allow for a member to direct the RSE licensee in writing not to
transfer these amounts.
6.23 The RSE licensee must also elect to comply with requirements
to be prescribed in regulations to provide a notice to a member when their
accrued default amount is moved to a MySuper product or is moved to
another fund. It is expected that the regulations will provide that a notice
must be given 90 days in advance of an accrued default amount being
moved where it will result in a change to the fees, insurance or investment
strategy of the member's interest. However, in some cases, there may be
only immaterial changes to members' rights as a result of the RSE
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Transition to MySuper
licensee being authorised to offer a MySuper product, for example, if an
existing default investment option is simply able to be converted into a
MySuper product. In this case, it is expected that a notice will be able to
be given after the change has occurred. It is also expected that the
Corporations Regulations will amended to ensure that an RSE licensee is
not required to provide a notice under section 1017B of the Corporations
Act where amounts are moved under this election to avoid duplication.
ASIC will be responsible for enforcing the regulations prescribing that
notices must be given to members. [Schedule 6, item 7, subsection 29SAA(3)]
6.24 APRA may cancel an authority to offer a MySuper product
where it is satisfied the RSE licensee has failed to give effect to its
election to transfer accrued default amounts to a MySuper product.
[Schedule 6, item 8, paragraph 29U(2)(j)]
6.25 If the RSE licensee makes this election it will also be a condition
of their license to give effect to this election. [Schedule 6, item 5,
subsection 29E(6B)]
6.26 An RSE licensee's actions in giving effect to an election under
new section 29SAA will not give rise to a liability to a member.
[Schedule 6, item 9, section 29XB]
6.27 A provision of the governing rules of a superannuation fund that
prevents an RSE licensee giving effect to an election to transfer an amount
in an accrued default amount to a MySuper product is void to the extent it
would prevent the RSE licensee from giving effect to the election.
[Schedule 6, item 10, section 55B]
Election to transfer amounts if MySuper authorisation cancelled
6.28 An RSE licensee's application for authorisation for a MySuper
product must also be accompanied by another election. The RSE licensee
must elect that it will transfer assets that were attributed to a MySuper
product if the MySuper product authorisation is ever subsequently
cancelled. [Schedule 6, item 7, section 29SAB]
6.29 The transfer must be made in accordance with the actions
required by the prudential standards that set out arrangements in relation
to the transfer of these amounts. [Schedule 6, item 7, paragraph 29SAB(a)]
6.30 The RSE licensee will be required, by this election, to transfer
amounts within 90 days of receiving a notice of cancellation of
authorisation of that MySuper product. [Schedule 6, item 7, paragraph
29SAB(a)]
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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6.31 If the RSE licensee makes this election it will be a condition of
their license to give effect to this election. [Schedule 6, item 5,
subsection 29E(6B)]
6.32 The election must be in writing and in the approved form.
[Schedule 6, item 7, paragraphs 29SAB(b) and (c)]
6.33 A provision of the governing rules of a superannuation fund that
prevents a trustee giving effect to this election to transfer amounts in a
MySuper product if authorisation is cancelled is also void to the extent it
would prevent the RSE licensee from giving effect to the election.
[Schedule 6, item 10, section 55B]
Requirement to transfer amounts to MySuper product
6.34 Any RSE licensee who does not make an application for
MySuper authorisation, and therefore does not make an election to
transfer accrued default amounts, will still be required to transfer amounts
to a MySuper product by 1 July 2017 under a new civil penalty provision.
[Schedule 6, item 12, paragraph 193(l) and item 13, section 388]
6.35 RSE licensees which are required to transfer accrued default
amounts to another superannuation fund will have to comply with
requirements set out in regulations and relevant APRA prudential
standards. It is expected that the arrangements to transfer accrued default
amounts will include a requirement for RSE licensees to advise each
affected member of the intention to transfer the amounts to a MySuper
product, and of the member's right to opt out of the process. For the
avoidance of doubt, the transfer of an accrued default amount is not
required to be made to a successor fund as defined in the SIS Regulations.
[Schedule 6, item 13, subsection 388(1)]
6.36 To put beyond doubt the application of these provisions
regarding the transfer of accrued default amounts to a MySuper product, if
the RSE licensee has not made an election, the requirement to transfer
accrued default amounts will not apply to the extent that it would not be
permitted by paragraph 51(xxxi) of the Constitution. [Schedule 6, item 13,
subsection 388(3)]
6.37 A trustee's actions in giving effect to the civil penalty provision
will not give rise to a liability to a member. [Schedule 6, item 13,
subsection 388(2)]
6.38 Contravention of the civil penalty provision will mean that
Part 21 of the SIS Act will apply.
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Transition to MySuper
Prudential standards and regulations on transition
6.39 Prudential standards will be able to be made in relation to the
transfer of accrued default amounts that are held by members of the fund
that is not eligible to hold a MySuper product offered by the fund or for
members of a fund for which that RSE licensee does not offer a MySuper
product. These prudential standards apply to both where the RSE licensee
has elected to transfer these amounts and where the RSE licensee is
required to transfer the amounts under the civil penalty provision.
[Schedule 6, item 9, section 29X]
6.40 The prudential standards may set out requirements that must be
met in relation to the transfer of the amounts and any other matters that
relate to the amount. [Schedule 6, item 9, paragraphs 29X(b) and (c)]
6.41 APRA will be able to make prudential standards dealing with
matters of a transitional nature relating to the Superannuation Legislation
Amendment (MySuper Core Provisions) Act 2012, the Superannuation
Legislation Amendment (Trustee Obligations and Prudential Standards)
Act 2012, and the Superannuation Legislation Amendment (Further
MySuper and Transparency Measures) Act 2012. The specific provisions
relating to prudential standards are set out in Part 3A of the Trustee
Obligations and Prudential Standards Act. [Schedule 6, item 13, section 389]
6.42 These prudential standards on transition will deal with matters
such as processes for identifying accrued default amounts, selecting a
MySuper product to transfer certain amounts to and other actions required
by the trustee in relation to the transfer of accrued default amounts.
6.43 Provision is made to enable regulations to be made dealing with
transitional, saving and application matters related to amendments made
by the Superannuation Legislation Amendment (MySuper Core
Provisions) Act 2012, the Superannuation Legislation Amendment
(Trustee Obligations and Prudential Standards) Act 2012, and the
Superannuation Legislation Amendment (Further MySuper and
Transparency Measures) Act 2012. [Schedule 6, item 13, section 390]
Other amendments
6.44 A definition of `MySuper member' is inserted into the
definitions at subsection 10(1) of the SIS Act. A MySuper member is a
member that holds a MySuper interest in the fund. [Schedule 8, items 1 and 3,
subsection 10(1)]
81
Chapter 7
Eligible rollover funds
Outline of chapter
7.1 This chapter explains the new regime by which RSE licensees
must be authorised to operate a specified superannuation fund as an
eligible rollover fund (ERF).
7.2 This chapter also outlines the enhanced director obligations and
enhanced trustee obligations for RSE licensees that operate an ERF and
transitional arrangements for existing ERFs that are not authorised before
the commencement of the new regime.
Context of amendments
7.3 ERFs are maintained for the single purpose of being a temporary
repository for the interests of members who have lost connection with
their superannuation accounts. ERFs are intended to hold these
superannuation interests and generally preserve their value until they can
be reconnected with the member.
7.4 ERFs are currently required to accept rollovers and transfers of
superannuation from all other regulated superannuation funds and in
circumstances specified in the SIS Regulations.
7.5 The amounts transferred to ERFs are typically small inactive
amounts or other amounts for members that cannot continue to be a
member of their original fund (for example, non-member spouse, in
circumstances connected with the division of superannuation).
7.6 Members of ERFs have lost connection with their
superannuation and rely on the trustee to protect their interests and
preserve their retirement benefit.
7.7 However, the Review found that ERFs, in general, were not
effectively fulfilling their function as they have failed to reconnect
amounts with members and member protection rules have not been
adequately protecting members' interests. Lost accounts can materially
impact on the adequacy of many individuals' retirement incomes,
particularly where accounts remain unclaimed at retirement, are eroded by
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
2012
unnecessary fees or charges, or receive poorer investment returns than
other retirement savings.
Summary of new law
7.8 Schedule 7 of this Bill amends the SIS Act to require trustees to
obtain authorisation from APRA to operate an ERF.
7.9 APRA will be able to accept applications for authorisation to
operate a regulated superannuation fund as an ERF from any RSE licensee
of a prescribed class. It is expected that the regulations will prescribe that
only RSE licensees with a public offer class of license or an extended
public offer class of license will be able to apply for authorisation for an
ERF.
7.10 On 1 January 2014, if an application for authorisation has not
been made or if APRA has refused authorisation, all balances in an
existing ERF are required to be transferred into an authorised ERF or a
fund that offers a MySuper product within 90 days.
7.11 To be authorised to operate an ERF, an RSE licensee must elect
the following:
· to transfer amounts held in the ERF as required by prudential
standards if authorisation is cancelled; and
· not charge members of the ERF a fee that relates to the costs
of paying conflicted remuneration or paying an amount to
another person that the RSE licensee knows, or reasonably
ought to know, relates to the payment of conflicted
remuneration.
7.12 New enhanced trustee obligations will apply to a trustee of an
RSE that has been authorised by APRA to offer an ERF as members fully
rely on the trustee to make judgments about managing their
superannuation. These enhanced trustee obligations require trustees to
comply with a duty to promote the financial interests of members of the
fund.
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Eligible rollover funds
Comparison of key features of new law and current law
New law Current law
RSE licensees must be authorised by A trustee of a regulated
APRA to operate an ERF. Only an superannuation fund or ADF must
RSE that is a regulated give to APRA a notice in the
superannuation fund can operate as approved form stating that the fund or
an ERF. Approved deposit funds ADF is an ERF.
(ADFs) cannot operate as an ERF.
Each trustee of an ERF must promote Existing duties for trustees of ERFs
the financial interests of the are contained in current section 52 of
beneficiaries of the fund, in particular the SIS Act and regulation 10.06 and
returns to those beneficiaries (after 10.07 of the SIS Regulations.
the deduction of fees, costs and
taxes).
A director of a corporate trustee of an A director of a corporate trustee is
ERF must exercise a reasonable required to exercise a reasonable
degree of care and diligence for the degree of care and due diligence (to
purpose of ensuring that the corporate the standard of a reasonable person)
trustee carries out the obligation to for the purpose of ensuring that the
promote the financial interests of the corporate trustee carries out its
beneficiaries of the fund. covenants in current section 52.
Detailed explanation of new law
Definition of eligible rollover fund
7.13 An eligible rollover fund is defined as a regulated
superannuation fund where the RSE licensee has been authorised by
APRA to operate a specified the superannuation fund as an eligible
rollover fund. [Schedule 7, item 1, subsection 10(1)].
Application process
7.14 To ensure that APRA is provided with sufficient 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 ABNs and other information
required by the approved form. [Schedule 7, item 15, subsections 242A(1) and
242A(2)].
7.15 If an existing ERF intends to continue operating as an ERF, the
RSE licensee should lodge their applications by 1 July 2013, or as soon as
possible after that date, in order to avoid the possibility that APRA has not
decided their application before 1 January 2014. A late application means
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the trustee runs the risk that the application is not decided and the trustee
would be obliged to transfer amounts to an authorised ERF or MySuper
product.
7.16 If any information contained in the application ceases to be
correct after 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 as soon as practicable. An application is
taken not to comply with this section if this requirement is contravened.
[Schedule 7, item 15, subsections 242A(3) and 242A(4)].
7.17 An application for authority lapses if it was made by an RSE
licensee and the RSE licensee ceases to be an RSE licensee before APRA
makes a decision on the application or, if APRA's decision is subject to
review, before the review is finally determined or otherwise disposed of.
[Schedule 7, item 15, subsection 242A(5)].
7.18 An RSE licensee that makes an application for authority must
accompany the application with two completed elections. These elections
are the same as the two corresponding elections that an RSE licensee
would have to make if they were to apply for authorisation to offer a
MySuper product.
7.19 First, the RSE licensee must elect to take the action required by
prudential standards in relation to amounts held in the ERF if an RSE
licensee's authority to operate the fund as an ERF is cancelled. The
prudential standards will set out a process for transferring assets to
another fund in these circumstances. The RSE licensee will not be subject
to any liability to a member for giving effect to this election.
7.20 Second, the RSE licensee must elect that they will not charge
any member of the ERF a fee that relates directly or indirectly to costs of
the fund in paying conflicted remuneration to a financial services licensee
or a representative of a financial services licensee.
7.21 In addition, the election by the RSE licensee also extends to not
charging any member of the ERF a fee that relates to costs of the fund in
paying an amount to another person that the RSE licensee knows, or
reasonably ought to know, relates to conflicted remuneration paid by that
other person to a financial services licensee, or a representative of a
financial services licensee.
7.22 APRA may request an RSE licensee to provide additional
information before making a decision on the application. [Schedule 7,
item 15, section 242D].
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Eligible rollover funds
Time period for deciding applications
7.23 APRA must decide an application by an RSE licensee for
authority to operate a regulated superannuation fund as an ERF within
60 days of the application being received, subject to certain provisions
allowing this period to be extended. This is the same period that is
allowed for a decision on an application for authorisation to offer a
MySuper product. The 60 day period starts on 1 July 2013 or the date of
APRA's receipt of the application, whichever is the later. [Schedule 7,
item 15, paragraph 242E(1)(a), subsection 242E(2) and section 393].
7.24 Should APRA request an RSE licensee to provide additional
information in relation to its application, APRA will have an additional
60 days from when it receives this information in which to decide the
application. The period of 60 days restarts if further information is
requested. [Schedule 7, item 15, paragraph 242E(1)(b)].
7.25 Additionally, APRA may extend the period for making a
decision on an application to operate an ERF by an RSE licensee by a
further 60 days, providing it notifies the RSE licensee in writing and
within the period they would otherwise have to decide the application.
[Schedule 7, item 15, subsection 242E(2)].
7.26 Should APRA not have made a decision within the time period
required, the application is deemed to be refused by APRA and the RSE
licensee is not authorised to operate an ERF. This is the same process that
occurs should APRA not have decided on an application for an RSE
licence or MySuper authorisation within the required time. [Schedule 7,
item 15, subsection 242E(4)].
Authorisation process
7.27 APRA must authorise an RSE licensee to operate an ERF if:
· the application is in the approved form, contains the
information required, states the RSE licensee's and fund's
ABNs and is accompanied by elections relating to the
transfer of amounts if authority to operate the fund as an ERF
is cancelled and to not charge members of the ERF a fee that
relates to conflicted remuneration;
· the RSE licensee provides all of the information required by
APRA to approve the authority;
· the RSE licensee is of the prescribed class;
· the fund is a registered fund under Part 2B of the Act;
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· it is satisfied the governing rules require that the fund meets
the purposes of an ERF and that a single diversified
investment strategy is to be adopted in relation to all the
assets of the fund;
· it is satisfied that the RSE licensee or each individual trustee
is likely to comply with the enhanced trustee obligations for
ERFs;
· it is satisfied that the directors of the RSE licensee are likely
to comply with the enhanced director obligations for ERFs;
· it is satisfied that the RSE licensee is likely to comply with
the general fee rules; and
· it is satisfied that the RSE licensee is not likely to represent a
product as an ERF when they are not authorised to do so.
[Schedule 7, item 15, section 242F].
7.28 APRA must refuse an RSE licensee's application for
authorisation to operate an ERF if it is not satisfied of any of these
elements. APRA's decision to refuse an application is a reviewable
decision. [Schedule 7, item 15, subsection 242F(2) and item 4, paragraph 10(1)(ua)].
7.29 If APRA authorises an RSE licensee to operate a regulated
superannuation fund as an ERF, APRA must notify the RSE licensee in
writing of the authority. For a notice given before 1 January 2014, the
authority takes effect on 1 January 2014. [Schedule 7, item 15, sections 242G
and 392].
7.30 If APRA refuses an application by an RSE licensee for authority
to operate a regulated superannuation fund as an ERF, APRA must take
all reasonable steps to ensure that the RSE licensee is given a notice
informing it of APRA's refusal of the application and setting out the
reasons for the refusal. [Schedule 7, item 15, section 242H].
Cancellation of authorisation
7.31 APRA may cancel the authorisation to operate an ERF where:
· it ceases to be satisfied that the governing rules of the fund
meet the purpose of an ERF or that a single diversified
investment strategy is to be adopted in relation to all the
assets of the fund;
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Eligible rollover funds
· it ceases to be satisfied that the RSE licensee is likely to
comply with the enhanced trustee obligations for ERFs;
· it ceases to be satisfied that the directors of the RSE licensee
are likely to comply with the enhanced trustee obligations for
ERFs;
· it ceases to be satisfied that the RSE licensee is likely to
comply with the general fee rules;
· it ceases to be satisfied that the RSE licensee is not likely to
represent a product as an ERF when they are not authorised
to do so;
· the RSE licensee ceases to be of the prescribed class;
· the fund ceases to be registered under Part 2B of the Act;
· the RSE licensee contravenes a governing rule of the ERF; or
· it is satisfied that the RSE licensee has failed to give effect to
an election not to charge a fee to members of the ERF that
relates to conflicted remuneration.
[Schedule 7, item 15, subsections 242J(1) and (2)].
7.32 If APRA decides to cancel an authority to operate a regulated
superannuation fund as an ERF, it is required to take all reasonable steps
to notify the RSE licensee in writing of the reasons for their decision.
[Schedule 7, item 15, subsection 242J(3)].
Trustee obligations relating to eligible rollover funds
Enhanced trustee obligations
7.33 Each trustee of an ERF must promote the financial interests of
the beneficiaries of the fund. These duties should be equal to
requirements for a MySuper product as trustees have full responsibility for
managing the members' balances. [Schedule 7, item 15, section 242K].
7.34 The enhanced trustee obligations for RSE licensees of ERFs are
the obligations imposed by the covenants in section 52, as enhanced by
the additional obligation to promote the financial interests of members of
the ERF. The obligations also include any covenants prescribed under
section 54A that are specified in the regulations as forming part of the
enhanced trustee obligations for ERFs. [Schedule 7, item 3, paragraph 10(1)(b)].
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Enhanced director obligations
7.35 Each director of a corporate trustee of an ERF is required to
exercise a reasonable degree of care and diligence that a superannuation
entity director would exercise in the corporate trustee's circumstance for
the purpose of ensuring that the corporate trustee complies with its duty to
promote the financial interests of beneficiaries of the fund. [Schedule 7, item
15, section 242L].
7.36 The enhanced director obligations in relation to ERFs comprise
this obligation and any covenants prescribed under section 54A that are
specified in the regulations as forming part of the enhanced director
obligations for ERFs. [Schedule 7, item 2, paragraph 10(1)(b)].
Contravention of trustee obligations relating to eligible rollover funds
7.37 There is a civil penalty provision for contravention of the
additional obligations of a trustee or director of a corporate trustee in
relation to an ERF where a trustee or a director of a corporate trustee has
breached their obligations. Accordingly, the consequences set out in Part
21 of the Act will apply. [Schedule 7, item 15, subsection 242M(2)].
7.38 This is appropriate as (in addition to the potential for the court to
order a civil penalty or, if certain fault requirements are satisfied, a
criminal penalty), it gives the court power to order a person to pay
compensation in relation to a contravention of the provision. A civil
penalty provision can be escalated to a criminal offence if it is breached
and there has been dishonesty or an intention to deceive or defraud.
Governing rules
7.39 The governing rules of an ERF are void to the extent that they
are inconsistent with the additional obligations of a trustee or director of a
corporate trustee in relation to an ERF. [Schedule 7, item 15, section 242N].
Misrepresentation of eligible rollover funds
7.40 All persons will be prohibited from being able to offer an ERF
unless they are authorised to do so by APRA. It is an offence of strict
liability if a person represents that they offer an ERF when they are not
authorised. A penalty of 60 penalty units will apply. This penalty is
consistent with similar offences for MySuper products and RSE licensees.
[Schedule 7, item 15, section 242P].
7.41 A strict liability offence is appropriate as APRA will provide a
written notice upon the authorisation or refusal of authorisation and hence
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Eligible rollover funds
RSE licensees will always know whether they are authorised to operate a
specified superannuation fund as an ERF.
7.42 Furthermore, ERFs play a specialised role in the superannuation
system as a temporary repository for the interests of members who have
lost connection with their superannuation accounts. These members are
most vulnerable and require their interests to be protected.
7.43 Misrepresentation that a fund is an ERF could inadvertently
reduce the level of protection for members in relation to the enhanced
trustee and director obligations when they otherwise would be in an
authorised ERF or a MySuper product.
Transitional provisions relating to eligible rollover funds
7.44 The RSE licensee of an existing ERF that has not been
authorised to operate as an ERF must take the action required under the
prudential standards in relation to the amount before the end of a period of
90 days beginning 1 January 2014. [Schedule 7, item 17, subsection 394(1)].
7.45 From 1 January 2014, existing ERFs can no longer accept
amounts unless they are authorised. This commencement date is
consistent with the start of the inter-fund consolidation regime. Balances
of existing ERFs that do not become authorised will need to be transferred
to an authorised ERF or to a MySuper product. [Schedule 7, item 17,
paragraph 394(2)(a)].
7.46 This provision ensures the amount is moved under inter-fund
consolidation or to an authorised ERF or MySuper product. This will
mean members will either be reconnected with their balances or remain
with the heightened protections of ERFs or MySuper products.
7.47 An existing ERF is taken to be an ERF for the purposes of
Division 3 of Part 24 during the period beginning on the day the
amendments commence and ending on 31 December 2013. [Schedule 7,
item 17, section 393].
7.48 APRA will be able to make prudential standards on the
movement of amounts held in existing ERFs that may include provisions
requiring an RSE licensee of an existing ERF that is not authorised to
operate as an ERF to transfer the amount to a regulated superannuation
fund that is an ERF or offers a MySuper product; setting out the
requirements that must be met in relation to the transfer of such an
amount; and dealing with other matters relating to such an amount.
[Schedule 7, item 17, subsection 394(2)].
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7.49 The RSE licensee is not subject to any liability to any member
of the fund for an action taken in accordance with moving amounts held in
existing ERFs. [Schedule 7, item 17, subsection 394(3)].
7.50 A read-down provision will only require transfers to take place
if it does not represent an acquisition of property on other than just terms
under paragraph 51(xxxi) of the Constitution. However, it is unlikely that
an acquisition of property will occur when balances from existing ERFs
are transferred into a newly authorised ERF or a MySuper product.
[Schedule 7, item 17, subsection 394(4)].
92
Index
Schedule 1: Fees and costs
Bill reference Paragraph number
Item 18, subparagraph 29SAC(1)(a)(i) 1.13
Item 18, subparagraph 29SAC(1)(a)(ii) 1.14
Item 18, subsection 29SAC(3) 1.16
Item 18, subsection29SAC(3) 1.17
Item 18, paragraphs 29SAC(1)(b) and 29SAC(1)(c) 1.20
Item 18, subsection 29SAC(1) 1.12
Item 19, paragraph 29T(1)(i) and Schedule 1, item 20, paragraph 1.56
29U(2)(d))
Item 20, paragraph 29U(2)(d) 1.54
Item 21, paragraph 29U(2)(k) 1.19
Items 23 -- 30, section 29V 1.72
Item 31, subsection 29V(8) 1.57
Item 33, subsection 29VA(10) 1.61
Item 33, subsection 29VA(9) 1.59
Item 34, section 99A 1.55
Item 35, subsection 29VB(5) 1.76
Item 35, paragraph 29VB(5)(b) 1.78
Item 36, section 29VD 1.21
Item 36, subsection 29VD(1) 1.23
Item 36, subsections 29VD(3) -- (7) 1.24
Item 36, subsection 29VD(3) 1.25
Item 36, subsection 29VD(4) 1.27
Item 36, subsection 29VD(5) 1.29
Item 36, subsection 29VC 1.64, 1.65
Item 36, subsection 29VD(6) 1.31
Item 36, subsection 29VD(7) 1.33
Item 36, subsection 29VD(8) 1.39
Item 37, paragraphs 31(2)(da) and 31(2)(db) 1.73
Item 38, section 33A 1.74
Item 40, subsection 99F(3) 1.49
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Item 40, subsection 99F(4) 1.50
Item 40, subparagraph 99F(1)(c)(v) 1.51
Item 40, subsection 99B(1) 1.66
Item 40, subsection 99C(1) 1.67
Item 40, subsection 99C(2) 1.69
Item 40, section 99D 1.70
Item 40, subsection 99E 1.71
Item 40, paragraph 99F(1)(a) 1.52
Item 40, subsection 99F(1) 1.43
Item 40, subparagraph 99F(1)(c)(iv) 1.44
Item 40, subparagraph 99F(1)(c)(ii) 1.46
Item 40, subsection 99F(2) 1.47
Item 41 1.79, 1.81
Schedule 2: Provision of benefits
Bill reference Paragraph number
Item 1, paragraphs 32C(2)(d) and (e) 2.13
Item 3, subsection 10(1) 2.16
Item 5, paragraphs 31(2)(ea) and (eb) 2.24, 2.27
Item 5, paragraph 31(2)(ea) 2.25
Item 5, paragraph 31(2)(eb) 2.28
Item 6, subsection 68AA(6) 2.20
Item 6, subsections 68AA(7) and (8) 2.21
Item 6, subsection 68AA(9) 2.23
Item 6, subsection 68AA(1) 2.15
Item 6, section 68AA 2.14
Item 6, subsections 68AA(3) -- (5) 2.17
Item 7 2.29, 2.30
Schedule 3: Collection and disclosure of information
Bill reference Paragraph number
Items 1 and 2, subsection 56(1) 3.33
Item 4, subsection 57(2) 3.16
94
Index
Item 4, subsection 57(3) 3.17
Item 4, paragraph 57(4)(a) 3.18
Item 4, paragraph 57(4)(b) 3.19
Item 4, subsection 57(1) 3.15
Item 8, paragraphs 1017BA(1)(a), (b), (c) and (d) 3.41
Item 8, subsections 1017BA(2) and(3) 3.42
Item 8, paragraphs 1017BA(1)(c) and (d) 3.44
Item 8, paragraph 1017BA(1)(e) 3.45
Item 8, subsection 1017BA(5) 3.46
Item 8, subsection 1017BA(4) 3.53
Item 8, section 1017BB 3.62
Item 8, subsections 1017BB(1) and (3) 3.63
Item 8, subsection 1017BB(2) 3.65
Item 8, paragraphs 1017BB(1)(a) and (b) 3.69
Item 8, subsections 1017BC(1) and (2) 3.71
Item 8, paragraph 1017BC(2)(b) 3.72
Item 8, subsection 1017BC(1) 3.73
Item 8, subsection 1017BC(3) 3.74
Item 8, sections 1017BD and 1017BE 3.75
Item 8, sections 1017BC, 1017BD and 1017BE 3.76
Item 8, subsections 1017BC(2) and (3) 3.81
Item 9, paragraph 1020E(1)(c), item 10, paragraph1020E(2)(c), item 3.47
11, paragraph 1020E(7)(a) and item 12, paragraphs 1020E(11)(c)
Item 14, subsection 1021NA(1) 3.48
Item 14, subsections 1021NA(2) and(3) 3.49
Item 14, subsection 1021NA(4) 3.50
Item 14, subsection 1021NA(5) 3.51
Item 14, subsections 1021NB(1) and (5) 3.82
Item 14, subsection 1021NB(2) 3.84
Item 14, subsection 1021NB(3) 3.85
Item 14, subsection 1021NB(6) 3.87
Item 14, subsection 1021NB(7) 3.88
Item 14, subsection 1021NC(1) 3.89
Item 14, subsection 1021NC(2) 3.90
Item 14, subsection 1021NC(3) 3.91
Item 14, subsections 1021NC(4) and (5) 3.92
Item 14, subsection 1021NC(6) 3.94
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Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill
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Item 14, subsection 1021NC(7) 3.95
Item 15, paragraph 1022B(1)(f) and Schedule 3, item 16, paragraph 3.52
1022B(2)(f) and Schedule 3, item 18, paragraph 1022B(3)(e) and
Schedule 3, item 19, subsections 1022B(7B) and (7C)
Item 22, section 1541 3.79
Item 22, subsection 1541(3) 3.83
Item 22, section 1539 3.99
Item 26, paragraph 3(1)(aa) 3.34, 3.35
Item 29, paragraph 13(4B)(a) 3.26
Item 29, paragraph 13(4B)(c) 3.27
Item 29, paragraph 13(4B)(d) 3.28
Item 29, subsection 13(4A) 3.23
Item 29, paragraphs 13(4A)(a) and (b) 3.24
Item 29, paragraphs 13(4A)(c),(d) and (e) 3.25
Items 31 and 33, section 31 3.31
Items 32, and 34 -- 37, section 31 3.32
Item 40, subsection 10(1) 3.54
Item 42, paragraph 29QB(1)(a) 3.55
Item 42, paragraph 29QB(1)(b) 3.56
Item 42, subsections 29QB(2) and (3) and Schedule 3, item 39, 3.58
subparagraph 6(1)(c)(ia)
Item 42, subsection 29QC(1) 3.59
Item 42, subsections 29QC(2) and (3) and Schedule 3, item 39, 3.61
subparagraph 6(1)(c)(ia)
Item 44, subsection 348A(3) 3.39
Item 44, paragraph 348A(1)(a), (b) and (c) 3.36
Item 44, paragraph 348A(1)(d) 3.37
Item 44, subsection 348A(2) 3.38
Item 45 3.96
Item 46 3.97
Item 47 3.98
Schedule 4: Modern awards and enterprise agreements
Bill reference Paragraph number
items 1, 2, 3 and 4, section 12 4.15
Item 5, section 149A 4.29
96
Index
Item 6, paragraph 155A(1)(b) 4.17
Item 6, subsections 155A(2)-(5) 4.27
Item 6, subsection 155A(1) 4.16, 4.19
Item 8, schedule 1, clause 9 4.18, 4.31
Item 8, clause 11 4.21, 4.23, 4.24
Item 8, Schedule 1, clause 10 4.32
Item 8, paragraph 194(h) 4.33
Item 8, clause 12 4.34
Item 8, clause 8 4.36
Item 9, subsection 12A(1) and Schedule 4, item 10, subsection 4.38, 4.39
32C(6)
Items 11, section 29U and item 12, section 29XC 4.26
Item 13 4.37
Schedule 5: Defined benefit members
Bill reference Paragraph number
Item 2, section 6AA and Schedule 5, item 4, subsection 10(1A) 5.17
Item 3, subsection 19(2CA) 5.12
Item 5 5.20
Item 7, subparagraph 29TB(1)(d)(i) and Schedule 5, item 6, 5.16
subparagraph 29TB(1)(d)(ii)
Item 10, paragraph 29WA(1)(a) 5.14
Schedule 6: Moving accrued default amounts
Bill reference Paragraph number
Item 3, subsection 10(1) 6.10
Item 4, subparagraph 20B(1)(b)(i) 6.11
Item 4, subparagraph 20B(1)(b)(ii) 6.12
Item 4, subsections 20B(2), (3) and (4) 6.13
Item 5, subsection 29E(6B) 6.25, 6.31
Item 6, paragraph 29S(2)(f) 6.16
Item 7, subparagraph 29SAA(1)(a)(i) 6.18
Item 7, paragraph 29SAA(1)(b) and subsection 29SAA(2) 6.21
Item 7, subsection 29SAA(3) 6.23
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Item 7, section 29SAA 6.14, 6.20
Item 7, section 29SAB 6.28
Item 7, paragraph 29SAB(a) 6.29, 6.30
Item 7, paragraphs 29SAB(b) and (c) 6.32
Item 8, paragraph 29U(2)(j) 6.24
Item 9, section 29XB 6.26
Item 9, section 29X 6.39
Item 9, paragraphs 29X(b) and (c) 6.40
Item 10, section 55B 6.27, 6.33
Item 12, paragraph 193(l) and item 13, section 388 6.34
Item 13, subsection 388(1) 6.35
Item 13, subsection 388(3) 6.36
Item 13, subsection 388(2) 6.37
Item 13, paragraph 387(1)(a) 6.17
Item 13, section 387 6.19
Item 13, section 389 6.41
Item 13, section 390 6.43
Schedule 7: Eligible rollover funds
Bill reference Paragraph number
Item 1, subsection 10(1) 7.13
Item 2, paragraph 10(1)(b) 7.36
Item 3, paragraph 10(1)(b) 7.34
Item 15, subsection 242A(5) 7.17
Item 15, section 242D 7.22
Item 15, paragraph 242E(1)(a), subsection 242E(2) and section 393 7.23
Item 15, paragraph 242E(1)(b) 7.24
Item 15, subsection 242E(2) 7.25
Item 15, subsection 242E(4) 7.26
Item 15, section 242F 7.27
Item 15, subsection 242F(2) and item 4, paragraph 10(1)(ua) 7.28
Item 15, sections 242G and 392 7.29
Item 15, section 242H 7.30
Item 15, subsections 242J(1) and 242J(2) 7.31
Item 15, subsection 242J(3) 7.32
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Index
Item 15, section 242K 7.33
Item 15, subsections 242A(1) and 242A(2) 7.14
Item 15, section 242M 7.35
Item 15, subsections 242A(3) and 242A(4) 7.16
Item 15, subsection 242M(2) 7.37
Item 15, section 242N 7.39
Item 15, section 242P 7.40
Item 17, subsection 394(1) 7.44
Item 17, paragraph 394(2)(a) 7.45
Item 17, section 393 7.47
Item 17, subsection 394(2) 7.48
Item 17, subsection 394(3) 7.49
Item 17, subsection 394(4) 7.50
99