Super Alert – 17 December 2021

Welcome to the last issue of the KHQ Super Alert for 2021. This week, APRA released its choice and MySuper product heatmaps and ASIC urged trustees who provide default income protection insurance to ensure that they are having a positive effect on member outcomes. The ATO also requested trustees to keep the ATO informed during the early stages of SFTs.

We hope you have a safe and restful holiday break. We will be back in late January 2022 to continue bringing you the latest superannuation news – and we can only hope that the regulatory environment moves at a slower pace next year!

APRA – Choice and MySuper Heatmap released

On 16 December 2021, APRA published its first choice product heatmap, as well as the annual MySuper heatmap. According to APRA, its data analysis shows that:

  • ‘45 per cent of MySuper products (31 out of 69) delivered returns below APRA’s heatmap benchmarks’;
  • ‘investment returns are the primary driver of underperformance’;
  • ‘60 per cent of investment options in the Choice Heatmap delivered returns below APRA’s heatmap benchmarks over seven years, with 25 per cent of options delivering significantly poor returns’; and
  • ‘fees and costs of choice products are considerably higher than MySuper products, without obvious benefit in financial outcomes for members’.

APRA is expected to ‘further intensify its supervision on the trustees of products that had been shown up on the heatmaps as delivering sub-standard member outcomes’.

Click here for details.

Treasury – Consultation in relation to quality of advice review

On 16 December 2021, Treasury issued for consultation draft Terms of Reference in relation to its quality of advice review. According to Treasury, the Government is committed to ensuring that Australians have access to high quality, affordable and accessible financial advice’. To help achieve this, the ‘Advice Review will consider whether measures that have been implemented by government, regulators and financial services entities have improved the quality of financial advice, whether further reforms or other changes are needed, and whether any measures or obligations are redundant or can be streamlined’.  Submissions are requested to ‘focus on the draft Terms of Reference’ as ‘[there] will be opportunities to comment on substantive policy issues once the review is underway’.

The consultation period ends on 4 February 2022.

Click here for details.

Treasury – Consultation in relation to financial adviser education standards

On 16 December 2021, Treasury issued a proposals paper in relation to professional standards for financial advisers. From ‘1 January 2022, the Minister for Superannuation, Financial Services and the Digital Economy will assume responsibility for setting the education and training standards’, which is currently within the purview of the Financial Adviser Standards and Ethics Authority (FASEA). The proposal paper seeks ‘feedback on the education standards and whether they remain fit for purpose including by ensuring that they adequately recognise on-the-job experience of advisers. Unless the standards made by FASEA are amended or replaced, the existing standards [will] continue to set the requirements for financial advisers’.

The consultation period ends on 1 February 2022.

Click here for details.

APRA – Annual superannuation statistics

On 15 December 2021, APRA published the annual fund-level and MySuper superannuation statistics. The statistics relate to the 2020/21 financial year and provide ‘detailed profile and structure, financial performance and financial position, conditions of release, fees and membership information’.

Click here and here for details.

APRA and ASIC – Notes from superannuation CEO Roundtable

On 14 December 2021, APRA and ASIC released the notes from their second ‘CEO Roundtable’, which was held on 1 December 2021 with 11 chief executive officers of superannuation funds in attendance. This CEO Roundtable follows the first CEO Roundtable, which took place at the end of April 2021, mentioned in our Super Alert of 2 July 2021.

The discussion focused on ‘financial resilience in superannuation and data’. The following matters were noted:

  • ‘trustees who are seeking input from the court [in relation to charging a fee for remuneration] need to plan for contingency scenarios should a court decision not be favourable’;
  • the CEOs ‘outlined strategies to ensure they have access to adequate financial resources to fund their business operations, and to pay for penalties should they arise’, which included ‘strengthening controls and frameworks, use of insurance, capital and support from a resourced parent company’;
  • trustees are encouraged ‘to remain transparent and timely with their communications to ensure that any [recent legislative] changes were adequately disclosed and members were well informed’;
  • APRA and ASIC highlighted ‘the need for trustees to focus on, and improve, data governance evidenced by unacceptable recent regulatory data resubmissions by a range of trustees’; and
  • the CEOs ‘acknowledged the need to invest in data governance…and shared common data challenges including; access to accurate and timely data from third parties and the need to industrialise and professionalise internal reporting functions to ensure that data is accurately reflected’.

Click here for details.

AUSTRAC – New guidance materials published

On 13 December 2021, AUSTRAC released two sets of guidance materials relating to compliance reporting and the release of new financial crime guides.

For relevant entities, a compliance report is one of their ‘important obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006’. According to AUSTRAC, the information provided by these reports ‘is critical to help us monitor how businesses are meeting their obligations, and what support and guidance may be needed for different industry sectors’. For those ‘required to submit a compliance report…[the] report opens on 1 January 2022 and must be submitted by 31 March 2022’. Some tips for completing the report include:

  • ‘Ensure your ML/TF risk assessment and staff training are up-to-date’;
  • ‘Strengthen how your business identifies and manages high risk customers’; and
  • ‘Use a strong transaction monitoring program to detect suspicious activity’.

AUSTRAC’s ‘[new] financial crime guides will help business to identify and stop criminal activity in its tracks’ by providing business ‘with patterns and indicators to understand, identify and report suspicious financial activity for a range of serious and organised crimes’. The new financial crime guides are titled ‘Preventing the exploitation of emergency and disaster support payments’ and ‘Preventing misuse and criminal communication through payment text fields’.

Click here and here for details.

ATO – Trustees requested to inform the ATO in the early stages of SFT planning

On 10 December 2021, the ATO issued a reminder to trustees to let the ATO know early if a successor fund transfer (SFT) is being planned in order ‘to help get it right the first time’. According to the ATO, SFTs ‘present a significant potential risk to the integrity of member data held by funds and can have adverse impacts on members’ data if not transferred correctly’.

The ATO notes that it has previously ‘published the SFT protocol document and checklist to assist funds planning or undertaking an SFT…[to] improve the integrity of member reporting and ultimately provide a better client experience’.

Click here for details.

APRA – Proposed amendments to SPS 310 Audit and Related Matters

On 10 December 2021, APRA released its proposed amendments to Prudential Standard SPS 310 Audit and Related Matters (SPS 310). The proposed changes to SPS 310 aim to ensure it aligns ‘with changes to APRA’s reporting standards for superannuation’.

The consultation period ends on 11 March 2022.

Click here for details.

ASIC – Trustees offering default income protection insurance urged to check on member outcomes

On 10 December 2021, ASIC issued a media release in relation to member outcomes relating to default income protection insurance. ASIC has ‘reviewed the practices of the trustees of five large funds that provided default income protection (IP) insurance on an opt-out basis to their members’.

According to Commissioner Danielle Press, the review ‘found that the trustees were not proactively giving their members clear explanations about when insurance benefits would or would not be paid as a result of offsets. This information is relevant to members in considering whether they should opt-out of default IP insurance’. The review also found:

  • ‘variation in the types of income that were offset against IP benefits’;
  • ‘disclosures about offset clauses were incomplete and difficult to understand’; and
  • ‘no evidence that the trustees had rigorously analysed how their offset clauses affect member outcomes’.

ASIC is recommending that trustees take the following steps:

  • ‘obtain and analyse data, including from their insurer, to assess how offsets affect member outcomes, including whether some groups of members are receiving low or no value’;
  • ‘improve the extent and quality of disclosures to members relating to IP offsets, especially when a member’s IP insurance will pay a reduced benefit’; and
  • ‘clearly explain to their members how ‘offset’ clauses work, so that members can make informed decisions about their insurance’.

Click here for details.

KHQ Lawyers - Jordan Diamantopoulos

Jordan Diamantopoulos Lawyer

Jordan is a graduate lawyer and is currently working in our Litigation team. Prior to joining KHQ Lawyers, Jordan worked as a Barrister’s research assistant and more recently at the Australian Competition... Read More

KHQ Lawyers - Sanela Osmanovic

Sanela Osmanovic Senior Associate

Sanela is a Senior Associate in the superannuation & financial services team, and has a broad range of experience working with a range of superannuation fund trustees, superannuation administrators,... Read More

KHQ Lawyers - Natalie Cambrell

Natalie Cambrell Director

Natalie Cambrell leads our superannuation and financial services team.  With more than 20 years’ experience, she has an enviable reputation for her in-depth knowledge in these highly regulated and... Read More