Superannuation Alert 2.8.18

Financial Services - 2 August 2018

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Welcome to Super Alert!


The Lander & Rogers Superannuation Alert is a brief overview of new developments in the superannuation industry.

Find our round-up of the developments as at 2 August 2018 here.


Royal Commission - Treasury submission

Source: Background Paper 24: Submission on key policy issues

On 26 July 2018, a submission of Treasury to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) was published.

The submission is titled "Submission on key policy issues" and addresses the "three matters that go to the heart of the instances of misconduct and failures to meet community standards brought to light [by the Royal Commission]". According to the submission, these are:

  • the culture and governance of financial (and other) firms and the related regulatory framework;
  • the capability and effectiveness of the financial system regulators to identify and address misconduct; and
  • conflicts of interest arising from conflicted remuneration and integrated business models.

With respect to the issue of conflicts of interest arising from integrated business models, Treasury cautions that although the forced "structural separation" of products and advice would have some advantages, it would involve, among other things, complexity and disruption, and could have unintended consequences.

Treasury notes that the implications of any structural separation for the superannuation sector would need specific consideration, given the provision of advice by superannuation funds can play a beneficial role. If structural separation was to be considered, Treasury also notes that exceptions could be considered for superannuation, including for intra-fund advice.

The Royal Commission's round five of hearings will explore these issues further.


 

Royal Commission - Submission

Source: Background Paper 25: Legal framework governing aspects of the Australian Superannuation System

On 26 July 2018, a submission of Professor Pamela Hanrahan to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) was published.

The submission is titled "Legal framework governing aspects of the Australian Superannuation System" and is a technical paper prepared for the Royal Commission.

According to the introduction: "Its purpose is to explain aspects of the legal framework for the Australian superannuation system, focusing on the rules that govern the use of members’ funds by trustees and other professional financial services providers in the superannuation system. It also deals briefly with advice in superannuation, and member dispute resolution".


 

Policy - Minister for Financial Services speech

Source: Speech: Address to the Financial Services Council Summit, Melbourne

On 26 July 2018, Kelly O'Dwyer, Minister for Revenue and Financial Services, delivered a speech at the Financial Services Council Summit in Melbourne.

The speech included discussion of the findings and recommendations of the recent Productivity Commission on superannuation, and the Government's proposed changes to superannuation through the various reforms proposed in the "Protecting Your Superannuation" and "Superannuation Accountability and Member Outcomes" legislation packages. The Minister also referred to the Government's aim of focussing more on the retirement phase of superannuation, by introducing a new retirement income framework which includes a covenant to "give retirees greater choice and flexibility when it comes to their income in retirement".

The Minister's comments follow the Productivity Commission's findings in relation to stated shortcomings of the industry, including in relation to powers for the regulators, fund transparency, trustee governance and information gathering.


 

ASIC - Chair of ASIC speech

Source: Speech: The trust deficit and superannuation

On 26 July 2018, in a speech to the Financial Services Council Summit 2018, James Shipton, Chair of ASIC, made remarks in relation to the "trust deficit" facing the financial services industry, identifying certain types of conduct contributing to this issue, including:

  • the exploitation of consumer disengagement and consumer (lack of) knowledge;
  • failures to promote informed decision making;
  • poor financial advice about superannuation issues and options;
  • poor treatment of consumers in their interactions with the super system;
  • practices that make it difficult for vulnerable consumers to access their super; and
  • defensiveness when it comes to transparency about fund options.

Mr Shipton called for a "wholesale review of conflicts of interests in firms, sectors and markets to identify, manage and, if appropriate, remove every single conflict of interest", and stated that ASIC will "increase [its] focus on the consumer perspective through the incorporation of more consumer testing and shadow shopping" and implement measures that will "heighten the intensity of [ASIC's] regulatory scrutiny in superannuation".


 

APRA - Response to industry feedback on data reporting

Sources: 

On 30 July 2018, APRA released a report outlining its response to industry feedback on its proposed new system of collecting data from relevant industry participants, which will replace the current data collection system known as "Direct to APRA".

According to the report, its purpose is to "inform stakeholders about the results of APRA's engagement and research, and provide direction while APRA tenders for, and selects, a [new data reporting] solution".

APRA also published a letter to all APRA reporting entities on the same day announcing the release of the report and stating that a second phase of industry engagement in relation to the proposed reporting changes is now underway.

 

Further information

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.