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- Underperforming funds now need to tell APRA why
- Re-contributions of COVID-19 early release super withdrawals allowed
- Separating couples can request partner’s super information
- SMSFs numbers rise but members fall
- Retirees experience higher inflation
- SMSF investors fuel growth in ETFs
- Federal Court makes declarations that Colonial First State made false or misleading representations
Underperforming funds now need to tell APRA why
The Australian Prudential Regulation Authority (APRA) will intensify its supervision of the trustees with products that failed its performance test, according to chair Wayne Byres’ opening statement to the House of Representatives Standing Committee on Economics.
APRA announced in late August that 13 funds (full list available here) had failed the performance test, and were required to inform their members that they had been assessed as underperforming.
“Since releasing the performance test results, APRA has intensified its supervision of trustees with products that failed the test and has required they provide a report identifying the causes of their underperformance and how they plan to address them,” Byres said in his statement on 10 September 2021.
Trustees are also now required to monitor these products closely and report relevant information, such as the movement of members and outflow of funds, to APRA.
Re-contributions of COVID-19 early release super withdrawals allowed
Individuals can now re-contribute amounts they withdraw from their super under the COVID-19 early release scheme without those contributions being counted towards their non-concessional contributions (NCC) cap.
Individuals have until 30 June 2030 to make these re-contributions.
The Australian Taxation Office (ATO) says the contributions cannot exceed the total amount of super accessed under the Covid-19 early release scheme and they cannot be claimed as a personal tax deduction.
Individuals who wish to re-contribute the early release amounts need to fill out a form and lodge it with their super fund. The super fund checks the amount does not exceed $20,000 and provides the ATO with the information from members on a monthly basis. The ATO then confirms that the amount matches the original early release withdrawal.
Separating couples can request partner’s super information
Legislation has passed that will allow the ATO to release information about a former partner’s super to a family law court upon request, increasing transparency around this major asset for separating Australian couples.
The Treasury Laws Amendment (2021 Measure No. 6) Bill 2021 (Schedule 5) will allow the ATO to release this information, provided the applicant is a party to a family law property proceeding and has applied to a family law court registry to request their former partner’s super information, held by the ATO.
They will be able to do this from 1 April 2022.
“These amendments will make it harder for parties to hide or under-disclose their superannuation assets in family law property proceedings, and will reduce the time, cost and complexity for parties seeking information about their former partner’s superannuation,” Attorney General Michaelia Cash and Minister for Superannuation, Financial Services and Digital Economy, Jane Hume, said in a joint media release.
The Government hopes the improved access to super information will better support separated couples to divide their property on a just and equitable basis.
“This will help alleviate the financial hardship and negative impact on retirement incomes that women in particular can experience after separation,” Cash and Hume said.
SMSFs numbers rise but members fall
The latest statistics for self-managed super funds (SMSFs) for the June quarter 2021 reveal a slight increase in the number of SMSFs to 597,900, up from 597,396 in the March quarter.
Despite this, the number of SMSF members fell from 1,120,936 to 1,114,529, while the value of estimated assets in SMSFs rose to $822 billion from just over $787 billion.
During the June quarter, listed shares remained the top asset held by SMSFs, at 28%, followed by cash and term deposits at 18%.
The gender split of SMSF members was 53% male and 47% female, while 86% of SMSF members are 45 years or older.
Retirees experience higher inflation
Retirees are facing higher inflationary pressures than the rest of the Australian population, according to the latest findings from the Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard.
The cost of living for couples aged around 65, living a comfortable retirement, rose by 2.3 per cent over the year to June, and 2.6 per cent for singles over the year.
ASFA said that was significantly higher than the underlying rate of inflation (as measured by the consumer price index or CPI) of around 1.5 per cent over the year to June.
“Price increases faced by retirees have begun to accelerate following a period when COVID-19 led suspensions or delays in key costs such as health insurance,” ASFA chief executive officer, Martin Fahy, said.
Significant increases in the price of essentials, namely petrol (+27.3%), hospital and medical services (+6.7%), and even basic fruit and vegetables, had a big impact on retirees’ overall budgets.
“It’s so important that future retirees are able to build sufficient savings over their working lives to ensure they can face retirement with financial confidence. Moving Australia to the 12 per cent Superannuation Guarantee (SG) setting is an excellent step towards achieving this goal,” Fahy said.
SMSF investors fuel growth in ETFs
ETFs remain an investment of choice for self-managed super funds (SMSFs), with recent research by State Street Global Advisers finding that 71% of ETF investors are SMSFs.
Two of the first ETFs launched in Australia, – the SPDR® S&P®/ASX 200 Fund (STW) and the SPDR® S&P®/ASX 50 Fund (SFY) – celebrated twenty years trading in Australia in August. State Street marked the occasion by conducting research of ETF investors and noting the changing demographics over the past two decades.
On average, ETF investors today have $170,000 invested in ETFs, which is their third largest investment after Australian shares ($235,000) and investment property ($205,000).
ETFs are also becoming more popular with a younger demographic, with Millennials making up 47% of new ETF investors in 2021, compared to 23% for Gen X, and 25% for Baby Boomers. Two decades ago, 24% of new ETF investors were Millennials, while 45% were Gen X and 24% were Baby Boomers.
“The Australian ETP market is now five times larger than it was just five years ago, with more than $116 billion in assets under management and more than 200 ETPs for investors to choose from,” head of SPDR ETF Asia Pacific distribution, Meaghan Victor, said.
“Even if the compound annual growth rate slows to a more comparable rate of 25 per cent, like we have seen in Europe and the US, Australian ETP assets are still expected to grow from more than $110 billion to $226 billion in the next three years.”
Federal Court makes declarations that Colonial First State made false or misleading representations
Colonial First State Investments, as trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund), made false or misleading representations and engaged in misleading and deceptive conduct when communicating with members, according to declarations made by the Federal Court.
The declarations relate to communication that Colonial First made to members of the FirstChoice Fund around investment decisions between 2014 and 2016. The misleading or deceptive conduct included Colonial telling members that recent legislative changes required members to contact them and obtain an investment direction to stay in the FirstChoice Fund, when that was not the case.
“Superannuation fund members need to receive clear and accurate information to make informed decisions,” ASIC deputy chair, Sarah Court, said.
“ASIC alleged Colonial made misleading representations which may have impacted members’ decisions about where to keep their funds and may have resulted in members’ funds being kept in higher fee-paying super products that included commissions. These actions did not put members’ interests first.”