In this guide
- ASIC disqualifies SMSF auditors as 40,000 breaches involving SMSFs reported
- APRA issues directions to NESS around additional board member
- NGS Super sets 2025 carbon reduction goal
- AustralianSuper to boost investment in private equity
- Cbus to reduce weekly admin fee
- ATO owed billions in unpaid Superannuation Guarantee Charge from employers
- Actuaries Institute paper offers guidance for retirement income covenant
ASIC disqualifies SMSF auditors as 40,000 breaches involving SMSFs reported
The Australian Securities and Investments Commission (ASIC) has deregistered 12 self-managed superannuation fund (SMSF) auditors and imposed additional conditions on the registration of an extra seven.
Of the 12 deregistrations, seven were accepted voluntarily. The actions against the 19 is also in addition to the 18 auditors ASIC acted against because of their involvement in reciprocal audit arrangements in March.
“SMSF auditors play a fundamental role in promoting confidence and instilling trust in the SMSF sector, so it is crucial that they adhere to ethical and auditing standards. ASIC will continue to take action where the conduct of SMSF auditors is inadequate and fails to meet the requisite standards,” ASIC Commissioner Sean Hughes said.
The ASIC actions followed breaches of: auditing and assurance standards, independence requirements, and registration conditions. ASIC may have also been concerned the individual was not a fit and proper person to remain registered.
There has also been a near 10% increase in auditor contravention reports (ACRs) reported by approved SMSF auditors over the 12 months to end June 2021. Last financial year ACRs were lodged for 13,900 SMSFs, reporting 40,200 contraventions. The ATO says that 45% of all contraventions were reported as rectified.
The most commonly reported contraventions were loans or financial assistance to members at 20%, while in-house assets and separation of assets constituted 17% and 13% of contraventions respectively.
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APRA issues directions to NESS around additional board member
The Australian Prudential Regulation Authority (APRA) has issued directions to the trustee of NESS Super that will enable the appointment of a second independent director. The addition of another independent director will result in an equal composition of employee, employer and independent directors on a six-person board.
The APRA directions will ensure that NESS makes the necessary amendments to its constitution to enable the appointment of the additional director. APRA said the directions are designed to improve the fund’s governance and ensure the board’s structure put it in a better position to deliver improved outcomes to NESS members.
The directions follow reviews by both APRA and an independent review by NESS.
APRA’s executive director of superannuation, Suzanne Smith, said the NESS board was working cooperatively with APRA.
“The promotion of strong and effective governance is fundamental to a robust superannuation industry and achieving good member outcomes. APRA will intervene to ensure that board structures appropriately address member interests and, where required, will give directions to drive the desired outcomes,” she said.
NGS Super sets 2025 carbon reduction goal
The education and community service super fund NGS Super has set an interim target of 35% reduction in carbon in its investment portfolio by 2025. The $13 billion super fund already has a 2030 target for carbon neutrality.
The announcement follows work over the past 12 months, which has confirmed both targets are achievable.
“If we wanted to decarbonise the portfolio tomorrow, we could, but it would come at a significant cost to our members’ investment performance and the retirement savings of our members,” NGS Super chief investment officer Ben Squires said.
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“Our plan for decarbonisation from now until 2025, and then on until 2030, includes engagement, divestment and investing in carbon-positive investments. We have committed to making no new investments in assets that, in our view, cannot transition to the low-carbon economy.”
Last year NGS Super was the first super fund to invest in Australian Unity’s Green Bond Fund with a $5 million investment.
AustralianSuper to boost investment in private equity
The $260 billion AustralianSuper will increase its allocation to private equity from 5% to 7% by 2024 and invest an additional $13 billion into private equity globally over the next two years.
The majority of the $13 billion, or $9.5 billion, will be invested in the US where AustralianSuper is targeting a range of sectors including healthcare, technology, industrials, consumer and financials.
“Not only can we act quickly and deploy large amounts of capital, but we can also bring considerable value to the process by leveraging the deep sector expertise of a 70-person strong global listed equities capability that manages over $143 billion,”’ AustralianSuper’s head of private equity Terry Charalambous said.
AustralianSuper’s private equity portfolio is expected to grow to $50 billion within five years and the fund’s US-based private equity team will grow to 20 members.
Cbus to reduce weekly admin fee
Cbus and Media Super have completed their merger, resulting in a $75 million megafund. As a result of the increased size, Cbus says it is able to offer increased economies of scale to members and a reduction in its weekly administration fee from $2 to $1.50 for all members from July.
“The benefits of scale are clear, enabling a downward trajectory on fees. Mergers are a contributor to this. Lower fees will help members to grow their super balance,” Cbus chief executive officer Justin Arter said.
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“Cbus’ total product fees are competitive and greater scale enables Cbus to spread fixed costs to reduce the average cost per account. Scale also brings greater capacity to invest in the fund’s internal capabilities.”
The cost of death and total and permanent disability (TPD) insurance premiums will also be lower for some younger members of the fund, however premiums for older members across different professions may increase, following a reassessment based on recent claims history.
ATO owed billions in unpaid Superannuation Guarantee Charge from employers
The Australian Tax Office was owed $2.9 billion in unpaid Superannuation Guarantee Charge as at end June 2021, according to the Australian National Audit Office’s recent Addressing Superannuation Guarantee Non-Compliance report.
Superannuation Guarantee Charge is the tax employers that don’t pay the Superannuation Guarantee are subject to.
While 95% of superannuation guarantee contributions are paid without ATO intervention, much of the shortfall is difficult to collect. And, on average, only 55% of superannuation guarantee charges raised by the ATO are collected.
The report made three recommendations for the ATO related to: implementing a preventative compliance strategy; use of enforcement and debt-recovery powers; and enhanced performance reporting.
“The ATO’s compliance activities are partly effective in achieving greater employer compliance with Superannuation Guarantee obligations. They have had a small influence on reducing the Superannuation Guarantee gap (an estimate of non-compliance) over time,” the report said.
Actuaries Institute paper offers guidance for retirement income covenant
The Actuaries Institute has released a paper designed to help superannuation fund trustees navigate the new Retirement Income Covenant (RIC). That covenant, which will come into effect from 1 July this year, seeks to make trustees more mindful of members retirement outcomes.
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Find out moreThe Actuaries Institute dialogue paper, A Framework to Maximise Retirement Income by senior actuaries Jim Hennington and Andrew Boal, offers suggestions and modelling that shows that drawdown strategies based on the period of retirement ending at a fixed age do not maximise members’ retirement incomes.
The paper instead suggests metrics that can be used by trustees to determine period of retirement end date, safe retirement income, expected retirement income and retirement income risk.
“The RIC puts the onus on the super fund to help members balance their risk versus having higher expected income. Many retirees may be willing to take some investment risk and/or longevity risk to increase their retirement income,” Hennington said.
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