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Super fund performance test to be finetuned
The Albanese Government has released its review of the Your Future, Your Super laws to address unintended consequences of the performance test deemed not in the best interests of fund members.
The government announced it will fine-tune the performance test for superannuation funds by:
- Prospectively increasing the testing period from eight to ten years to encourage longer-term investment decisions
- Calibrating key benchmarks to ensure that funds are not unintentionally discouraged from investing in certain assets
- Adjustments to the notification letter that trustees of failed products send to members
- Ensuring the test is fit-for-purpose when it is extended to trustee-directed products this year.
Assistant treasurer and minister for financial services Stephen Jones said in a release the government will consider other changes that may be necessary to improve fund performance.
With the performance test to apply to trustee-directed products for the 2023 financial year, choice and values-based products are also set to come under the spotlight.
“The existing test may not reflect the diversity and objectives of choice products. At the same time, it remains important that funds are held accountable for underperformance in the choice sector,” said Jones.
Consultation on the draft regulations is open until 2 May 2023 and the government wants to implement updates prior to the August 2023 performance test.
Financial Services Council calls for policy reform on retirement incomes
The Financial Services Council (FSC) has released research that shows policy reform focused on improving how Australians spend their superannuation savings would boost retirement incomes by 10% each year, or by $397 billion by 2050.
According to the FSC research, retirees are currently drawing down 17% less income from their super than an optimal system could achieve. The research found policy reform focussed on making financial advice more affordable, removing regulatory barriers to innovation in retirement products and simplifying how super interacts with the aged pension, aged care and health care would see retirees boost their drawdowns and income.
“A retirement system that is designed around the needs of retirees, providing the products and advice they need at retirement, and encouraging them to enjoy their savings in retirement, will enhance the long-term sustainability of the superannuation system and take pressure off future tax settings,” chief executive officer of the FSC Blake Briggs said.
ASIC wants super trustees to improve member communications
After reviewing performance communications by trustees that failed the annual performance test for MySuper products twice, the Australian Securities and Investments Commission (ASIC) says while improvements have been made, some trustees need to be more member-centric in their approach.
“This is an area of industry weakness and a common conclusion when ASIC reviews member communications,” the regulator said.
“The performance test supports transparency of superannuation product performance so members can make informed financial decisions for their retirement,” ASIC commissioner Danielle Press said.
Press said the review found that the trustees considered the guidance provided in its report last year and have made progress.
“Trustees complied with the mandatory disclosure obligations to notify their members of the failure and had good processes to ensure that no new members joined the closed products. However, we found that some trustees need to design and deliver performance communications with their current members in mind,” she said.
Australians really love super
According to a new survey from the Association of Superannuation Funds of Australia (ASFA), 98% of Australians consider the current coverage of compulsory super is about right or should be extended.
A large majority (80%) of respondents also thought self-employed people should be brought into the compulsory super system.
“This survey confirms that Australians not only see the benefit of compulsory super for employees but consider that all working Australians should be covered,” ASFA deputy chief executive officer and chief policy officer Glen McCrea said.
“The upcoming Federal Budget provides an opportunity to bring the self-employed and gig economy workers into the compulsory superannuation system. Along with essential workers, they helped get Australians through the pandemic by delivering food and other key items and they deserve a decent retirement when the time comes,” McCrea said.
Still $16 billion in unclaimed superannuation
The Australian Taxation Office (ATO) has consolidated almost 4.7 million super accounts with a value of $7.1 billion dollars since it commenced proactive super account consolidation in November 2019 but there is still $16 billion in lost and unclaimed super across Australia.
“That’s a lot of money. And it’s an increase of $2.1 billion since last financial year,” ATO deputy commissioner, superannuation and employer obligations, Emma Rosenzweig told delegates at the Conference of Major Superannuation Funds.
“Our new data also shows almost 1 in 4 (23%) Australians hold two or more super accounts, which can contribute to individuals forgetting about or losing super. Not to mention being at risk of paying more fees and charges.”
Rosenzweig called on super funds to keep in contact with their members and to remind them to update their details as well as encouraging them to check ATO online services to see if they have any lost super.
ASIC disqualifies SMSF auditors
ASIC has disqualified seven SMSF auditors, cancelled one and imposed additional conditions on three for breaches of their obligations during the period 1 October 2022 to 31 March 2023.
The breaches include breaching of auditing and assurance standards, independence requirements, or registration conditions. In some cases, action was taken because ASIC was satisfied the individual was not a fit and proper person to remain registered.
Ten of these actions were taken following referrals to ASIC by the ATO, while one SMSF auditor did not comply with conditions imposed by ASIC on their SMSF auditor registration.
