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- Retirement Income Covenant goes live
- Super fund average performance drops for only the fifth time in 30 years
- Deeming rates frozen for a further two years
- YFYS performance test to be reviewed
- SMSF numbers continue to increase
- ASIC acts against another 8 SMSF auditors
- ASIC commences civil penalty proceedings against Mercer Financial Advice
Retirement Income Covenant goes live
The Retirement Income Covenant, which forms part of the Corporate Collective Investment Vehicle Framework And Other Measures Bill 2021, went live on 1 July 2022 with super funds required to publish a version of their retirement income strategies for members on their website on that date.
“With an estimated 3.6 million Australians transitioning to retirement in the next decade, an entire generation of Australians are thinking about how their superannuation can help them live the next stage of their life with confidence and certainty,” the Financial Services Council chief executive officer Blake Briggs said.
“Superannuation funds are leading the charge by implementing a strategy for their members that best balances every retiree’s trilemma: maximising retirement income, with flexibility in how it is accessed, and managing the associated risks.”
Super fund average performance drops for only the fifth time in 30 years
The median superannuation balanced option fell by 3.3% over the last financial year, while the median growth option was down by 4.3%, according to analysis by SuperRatings. The median capital stable option also fell but by a smaller 1.7%.
“Funds have had a challenging second half of the financial year, dragging on a solid first half,” executive director of SuperRatings, Kirby Rappell, said.
“This was the fifth negative return for balanced options we have seen since the introduction of super 30 years ago; however, it follows the second highest annual return of 17.8% in 2021. So, when you look at it over the last two years, members’ balances are up.”
Members need to prepare for continued volatility with a rocky road ahead for investment markets.
“If you are not approaching or in retirement, keep in mind that all market movements in the short term are not the real story as you can’t access your money now. You only realise that loss if you switch investment options or take your money out, which would take away the opportunity to participate in any future recovery,” Rappell added.
Deeming rates frozen for a further two years
In welcome news for retirees receiving the Age Pension as they grapple with increases in the cost of living, the government has announced it will freeze social security deeming rates for another two years.
Minister for Social Services Amanda Rishworth said the freeze applies to all people receiving social security payments, including about 445,000 Age Pensioners whose rate of payment is affected by deeming.
The lower deeming rate will stay frozen at 0.25% and the upper rate will stay at 2.25% until 30 June 2024. At the same time, the thresholds at which they apply have been increased.
From 1 July 2022, the lower deeming rate applies to financial investments up to the threshold amounts of $56,400 for singles (previously $53,600) and $93,600 for couples (previously $89,000). The upper deeming rate applies for financial assets above these thresholds.
Deeming rate thresholds are normally indexed on 1 July each year in line with any increases in the cost of living. With inflation sitting at 5.1%, retirees will be glad of this temporary reprieve.
YFYS performance test to be reviewed
Assistant Treasurer and Minister for Financial Services Stephen Jones has announced a review into the operation of the Your Future, Your Super laws (YFYS laws) after the second round of MySuper performance tests have taken place by August this year.
In a statement, Jones said that while funds must always be held accountable for their performance, accountability mechanisms must not simultaneously create perverse or unintended outcomes for members.
“The government is aware of concerns that the YFYS laws have the potential to create such outcomes by discouraging certain investment decisions or certain infrastructure investments,” he said.
Treasury will also examine whether the test has had any unintended consequences to date.
The announcement was welcomed by industry bodies such as the Association of Superannuation Funds of Australia (ASFA).
“The review is timely and appropriate. It is a positive move that will help improve accountability and performance of the wider superannuation system,” said ASFA chief executive officer, Martin Fahy.
The performance tests for Choice options, which was due to begin this year, has also been paused for 12 months.
SMSF numbers continue to increase
The number of self-managed super funds (SMSFs) rose by 5,661 in the March quarter; there are now 605,469 SMSFs in Australia, according to the latest statistics from the Australian Taxation Office (ATO). The number of SMSF members rose by 9,762 to 1,135,026.
Total estimated assets in SMSFs also rose to $892 billion at the end of March, up from $877 billion at the end of last year. The top asset types held by SMSFs (by value) at the end of March were listed shares at 28% of total estimated SMSF assets and cash and term deposits at 17%.
ASIC acts against another 8 SMSF auditors
The Australian Securities and Investments Commission (ASIC) has deregistered five SMSF auditors, and imposed additional conditions on the registration of three more, during March and June this year.
These actions resulted from a range of breaches, including breaches against auditing and assurance standards, independence requirements and registration conditions. In some instances ASIC was just not satisfied the individual was a fit and proper person to remain registered.
“ASIC expects SMSF auditors to adhere to the ethical and auditing standards given the fundamental role they play in promoting confidence in the SMSF sector. ASIC will continue to take action where the conduct of SMSF auditors is inadequate. These actions help protect the integrity of SMSF audits,” ASIC commissioner, Sean Hughes, said.
Earlier in May, ASIC acted against another ten SMSF auditors for failing to lodge annual statements.
ASIC commences civil penalty proceedings against Mercer Financial Advice
The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Mercer Financial Advice (MFA) for allegedly making false or misleading representations to its customers about fees charged and services that were not provided.
ASIC also alleges Mercer failed to provide fee disclosure statements, or provided inaccurate statements, to more than 2,100 customers between July 2016 and June 2019.
During that period ASIC alleges Mercer made false or misleading representations on more than 5,500 occasions.
“These proceedings are another example of a large financial institution charging fees to customers that we allege it was not entitled to charge, being for financial services and advice those customers did not receive,” ASIC deputy chair Sarah Court said.
In its own statement, MFA said it had been cooperating closely with ASIC and put in place a remediation program at the time, with all affected customers being fully remediated.
“MFA again apologises to all affected customers. We deeply regret that this occurred, and we thank our customers for their ongoing support. MFA has implemented further controls and process changes to guard against this happening again,” MFA said.