Another round of changes to Australia $2.3 trillion superannuation system is coming but this time it’s all about holding fund managers to account.
Under legislation announced today, funds will now have to hold annual general meetings, just like companies, and will have to clearly state how fees are set and how member money is spent.
And the new rules close a loophole where some employers cut their their compulsory 9.5% super contributions by basing them on a lower base pay for employees who decided to salary sacrifices.
Regulator APRA (Australian Prudential Regulation Authority) will also be given more power to take action against funds.
The package doesn’t make any changes to the concessional taxation treatment of superannuation.
Previously the Coalition government applied a cap of $1.6 million on the balance from which tax-free pensions can be drawn.
Here’s the detail on the latest changes:
- Make superannuation providers more accountable to consumers through the introduction of annual member meetings.
- Require funds to report and publish more information on how the fund is being managed, including information on how fees are set and the way it spends members’ money.
- Strengthen default MySuper products including a stronger annual assessment to ensure the investment and insurance strategies, fees and returns are promoting the financial interests of members.
- Close a legal loophole that has been used by unscrupulous employers to short-change employees who choose to make salary sacrifice contributions.
- APRA will be given more capacity to take action if it has concerns a fund is not acting in the best interests of members. APRA will be able to refuse or cancel a MySuper authorisation.
- Directors of superannuation funds who breach their duties to members will become subject to the same civil and criminal penalties as directors of ordinary managed investment schemes.
- The rules will be changed to make it easier for consumers to opt-out of automatic life and disability insurance policies provided through superannuation.
Financial services minister Kelly O’Dwyer says the reforms are sensible and are already being embedded in the practices of high performing funds.
She says the government recognises the importance of having a competitive and efficient superannuation system.
“This is why we tasked the Productivity Commission to undertake a review of the system last year. The government will consider if any further changes to improve the superannuation system are required in light of any recommendations made by the Productivity Commission,” she says.
The Financial Services Council welcomed the reforms of the 25 year old superannuation system to make it more transparent, competitive and accountable to consumers.
“Consumers should rightly have the power to ask questions of the directors and senior managers of their funds about how they are run, how their fees are spent and where their retirement savings are invested,” says council CEO Sally Loane.