Welcome to the latest issue of the KHQ Super Alert. This week, ASIC released its IDR reporting requirements, APRA released a technical paper relating to the 2021 MySuper and Choice Heatmaps, and ASIC issued its enforcement update for the previous quarter.
APRA – Discussion paper in relation to data collection
On 31 March 2022, APRA released a discussion paper in relation to its future direction for data collection. The discussion paper ‘sets out APRA’s changing approach to data collection, the rationale for these changes and an outline of the implementation roadmap’. APRA hopes to complete the data transition ‘by the end of 2027’ and ‘fully decommission the Direct to APRA (D2A) data collection tool’.
Submissions on the discussion paper close 24 June 2022.
Click here for details.
APRA – Speech in relation to crisis preparedness
On 31 March 2022, APRA published a speech given by its Executive Director of its Policy and Advice Division, Renée Roberts. Ms Roberts discussed crisis preparedness by APRA-regulated entities and made the following key points:
- ‘resolution action by APRA is likely to occur prior to ordinary insolvency at what APRA describes as the “point of non-viability” – the point at which APRA believes it is compelled to intervene to ensure resolution is orderly’;
- ‘resolution is not ordinary insolvency. Resolution prioritises achieving APRA’s objectives (protecting beneficiaries and the financial system)…[and a] failed or failing entity will only be allowed to proceed to ordinary insolvency or restored to shareholders once APRA has achieved its objectives’; and
- ‘APRA’s goal is to do all it can to make sure that public funds are not necessary to achieve an orderly resolution. Whilst public funds may be used as a last resort, this should not be confused with a presumptive path for a failing APRA institution’.
Click here for details
ASIC – IDR data reporting requirements released
On 30 March 2022, ASIC published a media release confirming the requirements of the internal dispute resolution (IDR) data reporting framework. The framework will require 11 large financial firms (including four superannuation funds) to report IDR data to ASIC for the first time by 28 February 2023, followed by the remaining financial firms who will be required to report by 31 August 2023. ASIC has registered ASIC Corporations (Internal Dispute Resolution Data Reporting) Instrument 2022/205 which sets out these requirements.
ASIC Deputy Chair Karen Chester described the IDR data reporting framework as the ‘culmination of many years of work with industry to record, improve and standardise the quality of IDR data’, noting that ‘[u]pdated standards and requirements for IDR will assist firms to identify and address systemic issues that arise from complaints’.
ASIC has confirmed that it will begin publishing data once all financial firms have commenced reporting after 31 August 2023, with a consultation paper seeking feedback on its approach to publishing IDR data to be expected in the coming months.
Click here and here for details.
Federal Court – Decision in relation to AFCA’s death benefit determination
On 30 March 2022, the Federal Court handed down its decision in Wan v BT Funds Management Limited [2022] FCA 302. The case concerned a complainant’s appeal of an AFCA determination and whether the determination was occasioned by any legal error. AFCA had reviewed a trustee’s decision to pay a death benefit to certain beneficiaries and ultimately determined that the trustee’s decision was fair and reasonable. The Federal Court dismissed the appeal and ultimately determined that AFCA made no legal error in finding that the trustee’s decision was within power and fair and reasonable in effect.
Click here for details.
Federal Budget – Superannuation measures
On 29 March 2022, the Federal Budget was handed down. As part of the Budget Paper containing the superannuation-related measures, the Government announced only one superannuation-related measure which was an extension of the temporary reduction in minimum pension drawdown rates. The Government announced that it has extended this reduction ‘for account-based pensions and similar products for a further year to 30 June 2023’.
APRA – Release of technical paper for 2021 Heatmaps
On 29 March 2022, APRA published a technical paper on the sustainability of member outcomes identified in the 2021 MySuper and Choice Heatmaps (as referred to in our Super Alert of 17 December 2021). APRA’s analysis focused on the challenges faced by small and medium sized-funds, finding that ‘smaller superannuation funds are more likely to struggle to deliver quality, value-for-money member outcomes into the future’.
According to APRA, the findings ‘confirm the importance of scale as a driver for long-term member outcomes’, showing that ‘large superannuation funds (with assets of more than $50 billion) can more easily spread their costs over a wider membership base to keep their fees lower’. In contrast, ‘half of small funds faced immediate sustainability challenges due to declining net cash flows and member accounts, while more than half of medium-sized funds (with $10 to $50 billion net assets) have adverse trends in sustainability’.
APRA Executive Board Member Margaret Cole said that the findings prove that ‘size matters when it comes to boosting financial outcomes for super members’.
Click here for details.
Legislation – Relief for retirement estimates in periodic statements extended
On 28 March 2022, the ASIC Corporations (Repeal and Transitional Relief for Providers of Retirement Estimates) Instrument 2022/204 was registered on the Federal Register of Legislation. The instrument repeals ASIC Class Order [CO 11/1227] Relief for providers of retirement estimates, which ‘gave conditional relief from the licensing, conduct and disclosure obligations relating to personal advice in the Corporations Act 2001 that might otherwise apply to a superannuation trustee providing retirement estimates to its members’.
Although CO 11/1227 has been repealed, the transitional provisions have ‘extended the relief for superannuation trustees who gave their members retirement estimates on a periodic statement’ for a period of nine months. According to a media release published by ASIC on 31 March 2022, ‘[t]his will allow superannuation trustees to continue to use the relief when sending annual statements to members for the 2021-22 financial year’.
Click here and here for details.
APRA – Speech in relation to superannuation sustainability
On 28 March 2022, APRA published a speech given by its Executive Board Member, Margaret Cole. Referencing the above-mentioned findings in APRA’s analysis of sustainability metrics in the 2021 MySuper and Choice Heatmaps, Ms Cole noted that ‘there is a widening sustainability gap developing in the superannuation industry largely based around scale’. Without urgent action, the ‘gap will become a chasm that many smaller funds will be unable to bridge, undermining their ability to deliver for members and forcing them into a merger or out of the industry altogether’.
Ms Cole also observed that the ‘sub-set of small funds’ who ‘consistently bucked the sustainability trend’ often did so due to ‘a point of difference that distinguishes them from the market’.
Click here for details.
ASIC – Enforcement update for July to December 2021 released
On 28 March 2022, ASIC issued its enforcement update for the second half of 2021. ASIC reported that it ‘commenced 21 civil penalty proceedings during the period and commenced court action targeting misconduct in insurance, superannuation and markets as well as system failures within major banks’.
ASIC noted that ‘the period also marked the filing of ASIC’s last civil proceeding stemming from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’. The update explained that ‘[a]ll of ASIC’s Financial Services Royal Commission investigations are now complete, with 10 proceedings still before the courts’.
Click here for details.
Treasury – Consultation on quality of advice review
On 25 March 2022, Treasury issued a media release in relation to its consultation on the Government’s ‘quality of advice’ review (Review). Treasury previously published its terms of reference in relation to the Review, which we noted in our Super Alert of 18 March 2022. According to Treasury, ‘[c]onsistent with the terms of reference, [the] consultation seeks feedback on how the regulatory framework could better enable the provision of high quality, accessible and affordable financial advice for retail clients’.
The consultation period ends on 3 June 2022.
Click here for details.
ATO – Latest superannuation articles
On 25 March 2022, the ATO published the following two articles for APRA-regulated funds:
- Changes to the work test requirements for superannuation contributions; and
- Visibility of superannuation laws are changing (in relation to the ATO’s disclosure of superannuation information to parties in family law proceedings).
Click here and here for details.
Federal Court – Appeal of a payment order in relation to AFCA’s authority
On 23 March 2022, the Federal Court handed down its decision in Metlife Insurance Ltd v Australian Financial Complaints Authority (No 2) [2022] FCA 291. The case involved an appeal of the Court’s first instance decision, noted in our Super Alert of 11 February 2022. The appellant was successful in obtaining a stay of the Court’s payment order.
Click here for details.
Australian Law Reform Commission – Additional background paper published in relation to the review of financial services regulation
On 21 March 2022, the Australian Law Reform Commission (ALRC) published its fifth background paper in relation to its ‘Review of the Legislative Framework for Corporations and Financial Services Regulation’ (Inquiry). According to the ALRC, the background papers are ‘intended to provide a high-level overview of topics of relevance to the Inquiry’.
The fifth and most recent paper, Risk and Reform in Australian Financial Services Law (FSL5):
- ‘examines changing approaches to risk in Australian financial services regulation and the extent to which regulation has not adapted to take account of these new approaches’; and
- finds ‘that the legislative architecture for regulating product risks and conduct risks in financial services legislation has struggled to adapt to, and facilitate, changes in regulatory philosophies’.
Click here for details.
ATO – Key super rates and thresholds
On 17 March 2022, the ATO released updated rates and thresholds for ‘contributions and benefits, employment termination payments, super guarantee and co-contributions’ for the 2022/23 financial year. Most of these rates are unchanged from the 2021/22 financial year.
Click here for details.
