Superannuation Industry Stewardship Group key messages 18 August 2021

Welcome and introduction

Co-chair David Knox opened the meeting and welcomed ATO Co-chair Emma Rosenzweig to her first Superannuation Industry Stewardship Group (SISG) meeting.

Superannuation environment and overview

Regulators provided brief updates on progress with project initiatives or topics of interest.

Treasury

The Treasury Laws Amendment (2021 Measures No. 6) Bill 2021 was introduced in Parliament on 11 August and includes:

• Schedule 5 – Improving the Visibility of Superannuation Assets in Family Law Proceedings
• Removing the redundant requirement for superannuation funds to obtain an actuarial certificate when calculating exempt current pension income (ECPI), when the fund is fully in the retirement phase for all of the income year.

Treasury are continuing to work through budget measures scheduled to commence from 1 July 2022 including:

• First Home Super Saver Scheme – technical changes and increasing the maximum value: of contributions used to calculate the releasable amount to $50,000
• Flexible Super – reducing the eligibility age for downsizer contributions
• Flexible Super – repealing the work test for voluntary superannuation contributions
• Removing the $450 per month threshold for superannuation guarantee eligibility
• Self-managed Superannuation Funds – relaxing residency requirements.

Similarly, Treasury is progressing the budget measure Self-managed Superannuation Funds – legacy retirement product conversions.

Consultation on Superannuation Portfolio Holdings Disclosure closes on 31 August 2021.

A draft Bill has been released for consultation on financial and auditing requirements for superannuation funds. Submissions are due by 8 September 2021. Treasury offered to hold further out of session briefings to SISG members that have an interest in this topic.

Consultation on the Retirement Income Covenant position paper has closed and will inform draft legislation expected later this year. Sixty submissions were received in response to the consultation paper.

APRA

Suzanne Smith introduced Margaret Cole to SISG members. Margaret is an Executive Board Member of the Australian Prudential Regulation Authority (APRA) and commenced in her role at APRA on 1 July 2021. Margaret has primary responsibility for overseeing APRA’s activities in relation to Superannuation.

Your Future, Your Super tests will be published at the end of August – funds were notified on 30 July regarding APRA’s expectations of new legislative requirements that came into effect on 1 July 2021.

An FAQ has been published to provide guidance on reporting standards for phase 1 of the Superannuation Data Transformation project and outlines the staged implementation approach.

The deadline for submission of historical data required for SRF 251.2 Insurance Payments will be extended to 28 February 2022 (originally 30 September 2021).

APRA Connect is expected to go live in mid-September 2021.

APRA will consult on revisions to the Prudential Standard SPS 515 Strategic Planning and Member Outcomes next year. These revisions will include outcomes from APRA’s upcoming discussion paper on trustee financial resilience.

APRA, the Australian Securities and Investments Commission (ASIC) and the ATO continue to work closely on the Your Future, Your Super reforms.

ASIC

Six reforms arising out of recommendations from the Financial Services Royal Commission will commence in October 2021 including:

• prohibition on hawking of financial products
• new requirements for how breaches are reported to ASIC
• new regulatory guide on product design and distribution obligations.

ASIC will be adopting a measured approach to implementation.

AFCA

The Australian Financial Complaints Authority (AFCA) are waiting on the final report on the independent review of AFCA, which will be shared with the SISG when available.

AFCA are seeing an increase in complaints regarding insurance and reviewing:

• the quality of disclosure provided to fund members
• how total and permanent disability (TPD) cover applies to mental illness claims where the claimant was not working when suffering from their disability commenced, and is therefore subject to an ‘activities of daily living’ definition in the relevant insurance policy, can still undertake daily living tasks notwithstanding being unable to work due to their condition, and do not qualify for a benefit
• whether JobKeeper payments should be considered in income protection claims
• circumstances where permanent incapacity benefits are paid from an accumulation account, but the member did not meet requirements for a TPD insurance claim.

ATO

ATO are continuing work on review of fraud controls for increased fraud they are seeing in the SMSF space (promoter, use of products and identification fraud) to ensure there are adequate controls/alerts in place to support the release of Rollover v3.

Quarterly SMSF statistics are expected to be published 30 August 2021.

Your Future, Your Super

Next steps for Your Future, Your Super were outlined.

APRA have released a letter to all Registrable Superannuation Entity (RSE) licensees on the implementation of Your Future, Your Super reforms, that came into effect on 1 July 2021. The letter sets out APRA’s expectations of RSE licensees in light of the new legislative requirements.

APRA has released an information paper on its approach to administering the annual performance test for superannuation products, with a focus on APRA's ‘stitching’ methodology for combining MySuper product performance histories as part of the performance test.

APRA will be writing to Trustees with their results and publishing the data on 31 August. Trustees that fail the test will receive information about follow up tasks to improve their results.

ATO launched the Your Future, Your Super comparison tool on 1 July 2021 and have seen 300,000 hits (125,000 in the first month), with high media interest driving traffic to the tool.

APRA supplies and manages the data in the tool on all 80 MySuper Products. ATO works closely with APRA to resolve queries from super funds about how their data is displayed. Initial insights on usage include:

• 46% of users accessed the tool through a mobile device and ATO has received a lot of feedback on visibility of the tool from those devices. ATO is not envisaging making any changes to the tool until after the performance data has been released in September, which will provide a more holistic understanding of the user pathways and use of the tool.
• While we can determine what actions a user undertakes within the tool; it does not necessarily provide the motivation or reasoning behind a user’s actions.
• ATO is collating further information about performance and demographic data of users of the tool and will share that with SISG members post meeting.

ATO is providing a demonstration of the comparison and stapling tools to a number of stewardship and stakeholder groups over the coming weeks and will commence a large employer campaign from September 2021. The campaign will alert employers to the stapling tool requirements and will be complemented with revised web content.

SMSF Rollover v3

An update was provided on the status of SMSF Rollover v3 testing and onboarding.

Government to business and business to business (including APRA funds to SMSF providers) testing that is currently in progress, is expected to be completed by 30 September 2021.

Product verification testing has commenced with two funds now live and rollover requests received from myGov. ATO is expecting a further 15-20 funds to come on board by the end of August.

Six SMSF service providers building Rollover v3 functionality are expected to onboard between August and October.

Members of funds who have implemented and onboarded with SuperStream now receive an extra alert via text and email to make them aware of rollovers.

Partial rollovers will also be part of SuperStream and FAQs are being updated to include this advice.

Attendees

Guest attendees

Apologies