Address to the Financial Services Council Leaders’ Summit, International Convention Centre, Sydney

On 26 July 2017, the Hon Kelly O’Dwyer, the Minister for Revenue and Financial Services delivered an address in Sydney outlining the Government’s role in promoting the Australian financial services sector, it’s latest superannuation reform initiatives and the strengthening of regulatory supervision.

Citing an ANZ report forecasting that the Asian financial system would be larger than those of the USA and Europe combined by 2030, Ms O’Dwyer said the Government would be committed to facilitating Australian opportunities for the export of financial services to the Asian region.  This included providing regulatory certainty regarding tax residency for investment managers including a “Corporate Collective Investment Vehicle” (CCIV) regime, to assist in the export of Australian financial services and to ensure a level playing field with fund managers operating out of hubs such as Singapore and Hong Kong.

Australian Financial Complaints Authority (AFCA)

The Minister announced that the Government had established a transition team to bring the AFCA into existence. This one stop shop for disputes, will replace the current narrower focused complaints bodies such as the Financial Ombudsman Services, (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT.) The transition team will be led by  former Reserve Bank of Australia Assistant Governor Dr Malcolm Edey with a target implementation date of 1 July 2018.

The AFCA will reduce the restricted jurisdiction which often limited what the previous bodies could review and will also be granted the power to review complaints of higher value, and, the Minister stated, will benefit from expanded access remaining as a fair and free avenue for the resolution of disputes.

Superannuation Reform Package

The ‘Superannuation Accountability and Member Outcomes‘ package announced by the Government in July 2017, involves a proposed bill to amend legislation to require higher standards of transparency and accountability from superannuation fund trustees.  Initiatives include:

  • replacing the current ‘scale test’ with an ‘outcomes test’ that requires trustees to undertake an annual determination considering a number of features to ensure the outcomes being delivered are in the financial interests of their members;
  • providing the Australian Prudential Regulation Authority (APRA) with enhanced capacity to refuse or cancel a MySuper authorisation, where it believes that the registrable superannuation entity (RSE) licensee may not comply with its obligations;
  • providing APRA with improved directions powers to enable it to intervene at an early stage to address prudential concerns;
  • requiring trustees to seek approval from APRA prior to a change in ownership or control of an RSE licensee occurring;
  • requiring RSE licensees to hold annual members’ meetings to enable members to ask questions about all areas of their RSEs performance and operation; and
  • enabling APRA to gather more information on the operational and managerial expenses of RSE’s.

Submissions from industry have been invited on the proposed bill, due by Friday 11 August 2017.

Making it easier for members to opt-out of automatic insurance in Super

Commenting on the Insurance in Superannuation Working Group, the Minister said the Government was committed to making superannuation more consumer friendly and would ensure members could opt out of insurance cover in a ‘simple and straight forward way’, reducing hurdles for those who wish to optimise their retirement savings.  The Minister referred to the antiquated requirement for signed, written letters to be provided before cessation of insurance cover, when an on-line or phone call should be sufficient to action a request.

Strengthening Supervision and Enforcement

The Government will introduce fines and or criminal penalties on directors that breach their duties to members. APRA will be granted powers to direct a trustee where it has prudential concerns about a superannuation fund and APRA will have the power to reject a change in the ownership of a corporate trustee.

Fund Performance

With MySuper products (simple, cost effective super funds) which are often used as default funds, trustees will  be required to assess their MySuper products against a broader range of features and metrics each year. Trustees will also need to sign-off on the quality of their MySuper products and how the operation of the fund, including fees and expenses, is in the interests of members.

 

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