Super news for April 2022

Prior to Covid, average superannuation balances had grown by more than 10% over two years, according to research by the Association of Superannuation Funds of Australia (ASFA).

The research examines the latest available data on account balances for 30 June 2019, prior to Covid, and the hit some balances may have taken due to the early release scheme.

The retirement savings gap between men and women aged 60 to 64 in June 2019, based on median figures of $137,050 for women and $178,800 for men, was 23.4%.

“While this is well down on the 47% gap figure for those aged 55 to 64 in Australian Bureau of Statistics (ABS) figures for 2013–14, more work needs to be done,” ASFA said in the research paper.

The average balance in June 2019 for males (excluding people with a nil balance) was approximately $162,280, while for females it was around $146,420. That was an increase of 10.8% for males over the two years to June 2019 and a 12% increase for females.

Colonial settles class action with super members for $56.3 million

Parties to the Colonial MySuper Class Action have reached an agreement to settle for $56.3 million, inclusive of legal costs.

The class action, brought by Maurice Blackburn, alleges that Colonial failed to transition $3.2 billion of accrued default amounts (ADAs) of members within the FirstChoice Fund’s Employer Super division in a way that was both timely and in the best interests of those members.

As a result of those delays, over 100,000 members ended up paying higher fees and receiving lower investment returns for an extended period of time.

Maurice Blackburn alleges that Colonial failed: to exercise the degree of care, skill and diligence required of a prudent superannuation trustee; to perform their duties in the best interest of beneficiaries; and give priority to the interests of beneficiaries where a conflict of interest arose.

The Federal Court of Australia still needs to approve the settlement before compensation is paid, with the approval hearing to take place on 20 June 2022.

Federal Court orders Westpac to pay $20 million penalty

BT Funds Management, a Westpac subsidiary and superannuation trustee, has been ordered by the Federal Court to pay a $20 million penalty for incorrectly charging insurance payments that included commission payments.

Commission payments were banned under the Future of Financial Advice reforms in 2013, however BT Funds Management continued to charge the commissions until 2020.

BT’s Asgard Independence Plan Division Two (Asgard Fund) members were also charged commissions via premiums that were paid to financial advisers, despite members electing to have no financial adviser component.

“Over 9,000 Asgard Fund members were incorrectly charged commission payments totalling more than $9 million. This misconduct was caused by the failure to implement proper systems to ensure consumers are correctly charged,” ASIC deputy chair, Sarah Court, said.

The Court also found that BT Funds had misrepresented proper deductions in members’ periodic statements.

Westpac has also said it will pay over $9.8 million in remediation to over 9900 members by July this year.

“As the Court finalises these matters against Westpac, we urge Westpac, and other financial institutions, to look at their culture of compliance and invest in systems that mean incorrect charging of fees, premiums and commissions does not occur,” Court said.

Hostplus expands its investment options

Industry super fund Hostplus has added three new investment options for members and Hostplus Self-Managed Invest (SMI) investors.

Hostplus says the new options will provide more diversity and less asset and manager concentration risk.

The options are a Diversified Fixed Interest – Indexed option, which will invest in Australian and international government bonds and other investment grade debt. It is designed for members looking to minimise fees.

There is also an Australian Shares – Indexed option, also designed for members who want to minimise fees, and an actively managed International Shares – Emerging Markets option.

Hostplus’ SMI options enable SMSF investors to pool their funds with Hostplus and access investments that may be difficult to invest in as small investors.

Australian Retirement Trust focusses on ESG with new appointment

The Australian Retirement Trust (ART) has made its first appointment since its formation via the merger of Sunsuper and QSuper.

The $200 billion fund has appointed Nicole Bradford as head of sustainable investment. The appointment is designed to build on Australian Retirement Trust’s ongoing work in responsible investing.

“This is a critical role for Australian Retirement Trust, helping to build on the combined capability and strength of the wider investment team, and we are fortunate to have someone of Nicole’s experience and leadership qualities join the team,” Australian Retirement Trust’s chief investment officer, Ian Patrick, said.

“As a profit-for-members superannuation fund, we believe integrating environmental, social and governance (ESG) factors into our investment philosophy is consistent with better investment outcomes and contributes to a more sustainable future for our members and all Australians,” Patrick added.

Only one third of financial advisers pass February exam

Less than one third of financial planners who sat the 16th Financial Advisers Exam cycle, held in February 2022, passed, according to the Australian Securities and Investments Commission, which was administering the exam for the first time.

In February, 333 advisers sat the exam, with 73% of those sitting the exam re-sitting it for at least the second time, and 32.4%, or 108, passed.

Existing financial planners who were financial planners on 31 December 2021 needed to pass the exam before 1 January 2022. However, if they had sat the exam at least twice before 1 January 2022 they now have until 1 October 2022 to re-sit and pass the exam.

Historically, the majority of financial advisers pass the exam in a resit, according to ASIC. To date over 19,850 candidates have sat the exam.

“Nearly 91% of candidates who have sat the exam have passed, demonstrating they have the skills to apply their knowledge of advice construction, ethics and legal requirements to the practical scenarios tested in the exam,” ASIC said when announcing the results.

Easter bunny hit by inflationary pressures

It’s not only oil and semiconductors that are feeling excessive inflationary pressures, the cost of chocolate has also risen by over 32% since January 2021, according to the Firetrail Investments Chocolate Index.

That index represents the average performance of the prices of milk, raw sugar and cocoa. The price of Class IV milk, which is used to produce butter and milk powder, rose by 67%, as raw sugar rose by 29% and the price of cocoa increased by 8%.

“When we went into lockdown around the world, agricultural farmers and obviously energy and hard commodities restricted supply. They weren’t sure about what demand was going to be like, and we’re now paying for that,” Firetrail head of investment strategy, Anthony Doyle, said.

In comparison, the general consumer price index rose by 3.5% over the 12 months to end 2021. During the December quarter the most significant price rises were for fuel, which was up 6.6%, and new dwellings purchased by owner-occupiers, which were up by 4.2%.