Welcome to the latest issue of the KHQ Super Alert. The regulators have been busy this week with both ASIC and APRA releasing several reports and information for the industry including in relation to the APRA heatmap, member outcomes, design and distribution obligations, insurance in superannuation and the implementation of BEAR.
This is likely to be our last Super Alert for the year and we wish everyone a safe and enjoyable holiday break – we will be back in the new year.
APRA – New MySuper Heatmap
On 18 December 2020, APRA released an updated version of its ‘MySuper Product Heatmap’. According to APRA, in the 12 months since the last heatmap was published, ‘11 of the MySuper products that underperformed the investment benchmarks have exited the industry’ and ‘71 per cent of MySuper members (10 million members) are paying less in total fees and costs’.
APRA has advised that it is concerned about 10 MySuper products (relating to eight trustees) which continue to be poor performers. APRA will issue ‘notices in coming days requiring these trustees to provide information to APRA in relation to the underperformance of some of their MySuper products and the actions being taken to address that underperformance. Following consideration of this information, APRA will determine what further action it will take, including potential use of formal enforcement powers where appropriate’.
Click here for details.
APRA – Speech in relation to APRA heatmap
On 17 December 2020, APRA published a speech made by its deputy chair, Helen Rowell in relation to the APRA heatmap. Ms Rowell’s comments included:
- ‘this year’s heatmap paints a picture of a MySuper sector that is generally delivering sound outcomes to members, but with much room for improvement and some areas of concern’;
- ‘while the heatmap has had a positive impact in driving down fees and costs for members, some trustees are still charging what appear to be relatively high investment and administration fees given their investment performance and services’;
- ‘[w]ith the introduction of SPS 515, APRA has been stepping up its scrutiny of expenditure in recent years, and will be seeking much more granular expense data on a routine basis as part of the Superannuation Data Transformation program’; and
- ‘[b]y harnessing the power of transparency, trustees – and APRA – can more easily see where funds are falling short, so they can take steps to fix weaknesses’.
Click here for details.
ASIC – Internal dispute resolution data reporting requirements
On 16 December 2020, ASIC issued a media release in relation to further industry feedback that it is seeking for its internal dispute resolution consultation (relating to RG 165 updates). As a result of industry feedback from the earlier consultation, ASIC has ‘reached preliminary positions on a number of issues related to data reporting’ and is now seeking feedback on its ‘proposed approach and on the elements of the data dictionary’.
Submissions close on 12 February 2021.
Click here for details.
APRA – Annual superannuation statistics
On 16 December 2020, APRA released its annual statistics ‘on individual superannuation funds and their trustees’. The statistics include ‘information on fund profile and structure, financial performance and position, conditions of release, fees and membership’. APRA notes that the statistics ‘are specific to the financial year-end of the superannuation fund’ (which may not align with each other).
Click here for details.
APRA and ASIC – Trustee letter in relation to member outcomes and design and distribution obligations
On 15 December 2020, APRA and ASIC issued a joint letter to trustees in relation to better understanding the interaction of the member outcomes obligations and design and distribution obligations. The following statements are made in the letter:
- ‘the first Business Performance Reviews (BPR) are due by 31 December 2020 and the first Outcomes Assessments are expected to be completed early 2021. APRA expects RSE licensees to be well progressed’;
- ‘the commencement date for the [design and distribution obligations] is 5 October 2021 but significant preparation is needed by RSE licensees ahead of this date’;
- both obligations require trustees to ‘identify the needs of members’, ‘determine whether their decisions about choice products and broader business operations are delivering quality outcomes for members’ and ‘make decisions that are evidence-based and to monitor and review their product offerings and operations on an ongoing basis’; and
- ‘APRA and ASIC encourage RSE licensees to consider both regimes in tandem when they look to build systems and processes’.
Click here for details.
Treasury – Draft regulations in relation to insurance handling
On 14 December 2020, Treasury released for public consultation exposure draft regulations to assist with the implementation of ‘recommendation 4.8 of the Financial Services Royal Commission that makes insurance claims handling a financial service’.
Under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, ‘claimant intermediaries’ which are persons who carry on ‘a business of representing people to pursue insurance claims in exchange for a monetary or non-monetary benefit, or a benefit provided to another party’, will now be required to hold an AFSL. These regulations will ‘prescribe circumstances in which a person is not a claimant intermediary’.
Submissions close on 25 January 2021.
Click here for details.
Parliament – Miscellaneous Treasury regulations
On 14 December 2020, the Treasury Laws Amendment (Miscellaneous and Technical Amendments) Regulations 2020 were registered on the Federal Register of Legislation. These regulations:
- amend the SIS Regulations to ‘ensure that permanent residents of New Zealand are eligible for early release of their superannuation on compassionate grounds relating to the coronavirus…in accordance with the same policy settings that apply for Australian citizens, permanent residents of Australia and New Zealand citizens’ (with a retrospective date of effect of 25 March 2020);
- amend the Corporations Regulations to ‘make consequential amendments…as a result of amendments to be made by the Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019’; and
- amend the SG Regulations to delete a redundant provision.
Click here for details.
ASIC – Review of value of default insurance in superannuation
On 14 December 2020, ASIC released a report in relation to ‘measuring the value for money that Australians receive from default insurance provided by their superannuation funds’. According to ASIC, the report highlights that:
- ‘[t]here is wide variation in default cover offered…[f]or example, some large MySuper products offered over 20 times as much default cover as others. The premiums members paid for default cover also varied widely. Differences in price are partly due to different levels of cover, but also other factors including the average risk level of the membership and the generosity of terms and conditions’;
- ‘[d]ifferent cohorts of members can receive different outcomes. ASIC’s analysis…identified that some cohorts of members with default insurance, such as younger members and those in insurance policies with more restrictive terms and conditions, may be receiving relatively low value. Such outcomes raise questions about the appropriateness of the default insurance design and fairness between groups of members’; and
- ‘[t]rustees found providing member insurance data challenging. Some trustees were unable to properly identify which members had default insurance, and some struggled to explain patterns in the data they provided to ASIC’.
Click here for details.
APRA – Implementation of BEAR by ADIs
On 11 December 2020, APRA released an information paper in relation to its ‘review of the implementation of the Banking Executive Accountability Regime (BEAR) by three of Australia’s largest authorised deposit-taking institutions’. According to APRA, the information paper ‘shares entity-specific observations and examples of better practice identified in the review as part of APRA’s strategy to transform governance, risk culture, remuneration and accountability (GCRA) across all regulated entities’.
Click here for details.
Parliament – Royal Commission Response Bill passed
On 10 December 2020, the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was passed by both Houses of Parliament. As noted in our Super Alert of 13 November 2020, the Act will implement several Royal Commission recommendations including the anti-hawking and ‘no other role for superannuation trustees’ rules.
The associated Financial Sector Reform (Hayne Royal Commission Response) (Regulation of Superannuation) Regulations 2020 were registered on the Federal Register of Legislation the following day. The regulations amend the Corporations Regulations and SIS Regulations ‘to remove certain exemptions from the requirement to hold an [AFSL] to provide financial services, and to make other minor amendments, in support of broader reforms to the roles and responsibilities of superannuation industry regulators’.
Click here and here for details.
APRA – New version of Direct to APRA
On 9 December 2020, APRA released an updated version of its electronic data submission system, ‘Direct to APRA’. According to APRA, all trustees should ‘plan to upgrade…between now and 31 March 2021’. All submissions to APRA must be made via the updated system after 31 March 2021.
Click here for details.
