Superannuation Alert 10.12.14
Financial Services eBulletin - 10 December 2014
The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.
- On 1 December 2014, the Sex Discrimination Amendment (Boosting Superannuation for Women) Bill 2014 (Cth) received its second reading speech in the House of Representatives. The Bill was sponsored by Adam Bandt MP and proposes to amend the Sex Discrimination Act 1984 (Cth). The explanatory memorandum states that the purpose of the Bill is to allow employers to make higher superannuation contributions for women employees without being in breach of discrimination law or having to apply for an exemption.
- On 3 December 2014, the Treasury Legislation Amendment (Repeal Day) Bill 2014 was passed by the House of Representatives without amendment. The Bill has now moved to the Senate. According to the explanatory memorandum, the Bill proposes, among other matters, to amend the SIS Act to repeal the payslip reporting provisions.
- On 4 December 2014, the Tax and Superannuation Laws Amendment (2014 Measures No 7) Bill 2014 was introduced in the House of Representatives. According to the explanatory memorandum, the Bill deals with a range of tax and superannuation technical measures, including amendments "to ensure that individuals whose superannuation benefits are involuntarily transferred from one superannuation plan to another plan without their request or consent are not disadvantaged through the transfer", with effect on 1 July 2015.
- On 4 December 2014, the Financial Ombudsman Service released its response to stakeholder submissions on amendments to its Terms of Reference. The approved amendments will generally come into effect on 1 January 2015 (except for two changes which will come into effect on 1 January 2016).
- On 7 December 2014, the Financial System Inquiry Final Report was released. The report makes 44 recommendations which seek to improve efficiency, resilience and fair treatment in the Australian financial system. The recommendations focus on two general themes: funding the Australian economy and boosting competition; and five specific themes: resilience; superannuation and retirement incomes; innovation; consumer outcomes and the regulatory system. The Inquiry's recommendations which particularly relate to superannuation include:
- “Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds” (Recommendation 8);
- Seek general political agreement of the objectives of the superannuation system, enshrine these objectives and provide public reporting on how the policy proposals are consistent with achieving these objectives in the long term (Recommendation 9);
- Improve efficiency during the accumulation phase by introducing “a formal competitive process to allocate new default fund members to MySuper products, unless a review by 2020 concludes that the Stronger Super reforms have been effective in significantly improving competition and efficiency in the superannuation system” (Recommendation 10);
- “Require superannuation trustees to pre-select a comprehensive income product for members' retirement. The product would commence on the member's instruction, or the member may choose to take their benefits in another way. Impediments to product development should be removed" (Recommendation 11);
- “Provide all employees with the ability to choose the fund into which their Superannuation Guarantee contributions are paid” (Recommendation 12);
- “Mandate a majority of independent directors on the board of corporate trustees of public offer superannuation funds, including an independent chair; align the director penalty regime with managed investment schemes; and strengthen the conflict of interest requirements” (Recommendation 13);
- Improve the accountability of product issuers and distributors by introducing a “targeted and principles-based product design and distribution obligation” (Recommendation 21);
- “Raise the competency of financial advice providers and introduce an enhanced register of advisers” (Recommendation 25);
- Provide the industry with more time to comply with complex regulatory change and undertake reviews of major regulatory changes more frequently after they have been implemented (Recommendation 31);
- Strengthen impact investment by exploring “ways to facilitate development of the impact investment market and encourage innovation in funding social service delivery. Provide guidance to superannuation trustees on the appropriateness of impact investment. Support law reform to classify a private ancillary fund as a ‘sophisticated’ or ‘professional’ investor, where the founder of the fund meets those definitions” (Recommendation 32);
- Take steps to engage members by publishing "retirement income projections on member statements from defined contribution superannuation schemes using ASIC regulatory guidance…(and) facilitate access to consolidated superannuation information from the ATO to use with ASIC’s and superannuation funds’ retirement income projection calculators" (Recommendation 37);
- "Identify, in consultation with the financial sector, and amend priority areas of regulation to be technology neutral. Embed consideration of the principle of technology neutrality into development processes for future regulation. Ensure regulation allows individuals to select alternative methods to access services to maintain fair treatment for all consumer segments" (Recommendation 39); and
- Rename "general advice" (Recommendation 40).
The Government intends to consult with industry and consumers before making any decisions on the recommendations. Submissions on the final report are due by 31 March 2015.
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