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- New super fund data confirms largest super funds
- Consultation on the retirement phase of super
- Scaling up access to financial advice
- Reforming the super performance test
- ATO reports increase in authentication scams
- Cost pressures on retirees increase
- ASIC penalises fees for no service
- Charlie Munger dies at 99
New super fund data confirms largest super funds
APRA released it’s annual fund-level statistics for June 2023, showing that AustralianSuper retained it’s position as Australia’s largest funds both in terms of members (3,255,344 members) and total assets ($311bn).
Australian Retirement Trust (formerly Sunsuper and QSuper) was second largest both in terms of members (2,334,304 members) and total assets ($264bn).
The data also offers the first insight into Vanguard Super which launched in November 2022. At the end of June 2023 they had 8,880 members, making them the 70th largest super fund in terms of members, and 79th largest in terms of assets ($623m).
Consultation on the retirement phase of super
The Federal Government has released a discussion paper on the retirement phase of superannuation as it looks at improving retirement outcomes for Australians.
The paper is seeking community and industry views on three key areas:
- Supporting members to navigate the retirement income system
- Supporting funds to deliver better retirement income products and services
- Making lifetime income products more accessible.
“While there is recognition of super’s importance in building nest egg savings, there has been less attention on optimising its role in retirement. There’s a clear need for better information, support and well-rounded income products to help retirees make the most of their super,” treasurer Jim Chalmers and assistant treasurer and minister for financial services Stephen Jones said in a joint statement when releasing the paper.
“We want to ensure super delivers on its foundational promise of providing a dignified retirement for more Australians.”
The government is concerned that most retirees do not have access to appropriate products that can help them maximise their super over their lifetime.
“In fact, 84% of retirement savings are held in account-based or allocated pensions, with only 3.5% held in annuities. Unlike account-based pensions, annuities offer the option of receiving regular payments for life, regardless of how long a person lives,” the joint statement said.
The paper was generally welcomed by industry associations like the Association of Superannuation Funds of Australia (ASFA).
“The take up of retirement income products offering protection against the financial consequences of longevity has been modest to date,” ASFA interim CEO Leeanne Turner said.
“What is needed is the removal of any remaining regulatory barriers to the development of such products.”
Submissions are open until 9 February 2024.
Scaling up access to financial advice
In a busy end to the parliamentary year, minister for financial services Stephen Jones also released the government’s final response to the Quality of Advice Review.
Most notably, he said the government will introduce:
- A ‘modernised and flexible best interests’ duty that will apply to all providers of personal advice
- A new class of financial advice provider – to be termed ‘qualified advisers’ – to increase the availability and affordability of simple personal advice
- More flexibility for superannuation trustees to provide advice
- A ‘principles-based’ advice record to replace statements of advice.
The final response builds on reforms the government is already progressing as part of its Delivering Better Financial Outcomes work.
The reforms were widely embraced by the superannuation industry.
AustralianSuper’s chief officer retirement Shawn Blackmore said introducing a new category of financial adviser is a smart way of addressing an urgent need for straightforward advice that is going to grow exponentially in the next decade.
Aware Super chief executive officer Deanne Stewart said the reforms represent a “crucial extension” to the advice services super funds can currently offer their members.
“These important reforms enable us to significantly increase the scale at which we can provide safe, accessible, high-quality financial advice to the five million Australians in or nearing retirement,” she said.
The government has said it will consult industry and consumer stakeholders over coming months on the design of the draft legislation and that legislation will be developed to implement the changes in 2024.
Reforming the super performance test
The government also announced it would be consulting on options to improve the annual superannuation performance test conducted by the Australian Prudential Regulation Authority (APRA). This follows the Treasurer’s third Investor Roundtable in Canberra, where banks, superannuation funds, venture capital firms and asset managers joined industry experts and government.
“The test has helped lift the investment performance of superannuation funds by encouraging continual improvement or exit of underperforming funds,” a joint statement from the Treasurer, Jim Chalmers, Minister for Climate Change and Energy, Chris Bowen, and Minister for Defence Industry and International Development and the Pacific, Pat Conroy, said.
“However, there are concerns that the current test may be influencing investment decisions to the detriment of member outcomes, including discouraging investment in asset classes that can strengthen the economy, such as in housing and the net zero transformation, even where it would be in the best financial interests of members.”
The government said a consultation paper would be released soon.
ATO reports increase in authentication scams
The Australian Tax Office is reporting that it is seeing an increase in multifactor authentication (MFA) scams and emails impersonating the ATO.
The ATO said scammers are emailing clients advising them that they are required to update the multifactor authentication (MFA) on their ATO account due to ATO security updates.
“The scam email includes a QR code which takes you to a fake myGov sign in page designed to steal your myGov sign in details,” the ATO said.
The ATO reiterated that it will never send emails with a QR code or a link to log in to its online services. If you receive such an email, the ATO advises not to scan the QR code, not click on links, not open attachments or download files and to forward the email to email@example.com and then delete it.
Cost pressures on retirees increase
The Association of Superannuation Funds of Australia (ASFA) reports that the annual expenditure needed to reach its comfortable Retirement Standard rose 1.3% in the September quarter to a record high of $71,724 per year for couples.
The annual expenditure needed by singles rose 1.5% to $50,981. That equates to an annual increase of 5.5% and compares with a 5.4% increase in inflation.
“Retiree budgets have been under sustained pressure for the last two years,” ASFA Interim CEO Leeanne Turner said.
“In the past 12 months alone, utility prices have surged more than 12% as the cost of electricity, water and gas continue to rise.”
The cost of electricity was up on average by 4.2% in the September quarter. But for retiree households not eligible for electricity rebates, electricity prices increased 18.6%.
Automotive fuel prices rose 7.2% in the September quarter, which is the highest quarterly rise since March 2022.
On the positive side, annual food inflation eased to 4.8% in the September quarter, down from 7.5% in the June quarter and the peak of 9.2% in December 2022. Fruit and vegetable prices fell 6.4% compared to 12 months ago.
ASIC penalises fees for no service
The Federal Court has ordered superannuation trustee OnePath Custodians Pty Ltd (OnePath) to pay a $5 million penalty for making false or misleading representations about its right to continue charging fees.
The decision is the second “fees for no service” penalty decision obtained by ASIC in a week after Mercer Financial Advice was penalised $12 million for charging fees to customers it was not entitled to charge.
“The Court found that between December 2015 and November 2021, OnePath made false or misleading representations to members of the superannuation product ‘Integra Super’ about Adviser Service Fees and deducted $3.8 million in fees from members for advice services they did not receive,” ASIC said in a statement.
OnePath members had been told they still had to pay a fee for advice from a Plan Adviser even though, in the division of Integra Super they were transferred to, they were not entitled to received advice services.
“This case highlights the importance of a super trustee charging fees correctly and providing accurate, clear and timely information to members about superannuation fees. Members should be confident that their retirement savings are not reduced over time by superannuation trustees making deductions from their accounts they are not entitled to make,” ASIC deputy chair Sarah Court said.
“ASIC will continue to focus on misconduct that results in the erosion of super balances,” she added.
Charlie Munger dies at 99
Vice chairman of Berkshire Hathaway and Warren Buffett’s right-hand man Charlie Munger has passed away at age 99 at a California hospital.
In a brief statement, Warren Buffett, chief executive officer of Berkshire Hathaway, said: “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation.”
Munger was appointed vice chairman of Berkshire Hathaway in 1978 and jointly chaired the company’s very popular annual meetings for decades. He was known for his pithy one-liners, and his respect for learning as one of the best ways to improve in investing and in life:
“Those who keep learning, will keep rising in life.”