On Friday last week, the Superannuation Legislation Amendment (MySuper Measures) Regulation 2013 was made. The Treasury also issued a document describing the “outcomes of the consultation process” relating to the earlier exposure draft regulation. Reading the outcomes document and the final regulation, it is clear that a number of the measures proposed in the exposure draft regulation have been postponed or adjusted.
Our alert on the earlier exposure draft regulation is available here.
What is included?
The final regulation sets out the requirements for:
- “product dashboards” for MySuper products; and
- disclosing information about executive officer remuneration and the fund.
The regulation also includes amendments relating to periodic statements and PDSs for superannuation products.
There are also amendments setting out additional information that trustees must give to APRA. This includes written notice of a trustee’s decision to transfer a member’s benefits from the fund, without the member’s consent.
What is not included?
The final regulation does not include the requirements for disclosing information relating to superannuation fund investments (portfolio holdings). The Government will undertake further consultation in relation to the portfolio holdings requirements in August 2013.
Also, the regulation does not include the provisions proposed in the exposure draft concerning the priority to be given to accumulation benefits on the winding up of a hybrid fund (a fund which provides both accumulation benefits and defined benefits).
Trustees will be required to provide the product dashboard information in a “product dashboard table”. Publication of a MySuper product dashboard will now be optional from 1 July 2013 and mandatory from 31 December 2013.
The table must include 5 items: the return target, the return, a comparison of those two items, the level of investment risk, and a statement of fees and other costs. The comparison of the return target and the return must be set out as a graph in the table. If the MySuper product and any “predecessor product” has been offered for more than 10 years, the calculation period (for working out the return and the comparison of the return target and the return) is 10 years. Otherwise, it is the period over which the product has been offered. It appears that a default investment option that was rebadged as a MySuper product will be a predecessor product.
If a MySuper product has a lifecycle investment strategy a product dashboard table must be provided in relation to each age-based cohort.
The regulation will also allow a lifecycle strategy to take into account the member’s account balance, contribution rates, current salary, gender and the likely time remaining to a member’s retirement date in addition to (and not instead of) the member’s age.
The regulation does not contain any comparable provisions in relation to choice investment options. These will be contained in a subsequent regulation.
Remuneration of executive officers
Trustees will be required to disclose information about the positions held by, and benefits provided to, their executive officers. The information is not limited to benefits provided by the trustee. However, the regulation provides that, if the executive officer receives a benefit from a related entity and some or all of the benefit relates to work performed for the trustee, then, to that extent, the benefit must be disclosed. The explanatory statement says that this requires disclosure which “accurately represents the proportion of the person’s time committed to their obligations to” the fund. It is not clear that the regulation implements this statement of policy, nor is it clear that the regulation is well-adapted to achieving any similar purpose.
Benefits include salary and bonuses, superannuation benefits, sign on bonuses, retention payments, termination payments, shares, rights and options. Generally, they must be disclosed for the two most recently completed financial years.
The Treasury “outcomes” document says: “The Government is comfortable with ASIC providing relief until 31 October 2013”. Consistent with this, ASIC Class Order [CO 13/830] says: “A RSE licensee of a registrable superannuation entity does not have to comply with subsection 29QB(1) of the Act until 31 October 2013”.
Once a trustee becomes required to publish a product dashboard for a MySuper product or a choice investment option (see above), the trustee will be required to include the latest product dashboard or dashboards relevant for a particular member in the member’s periodic statement.
There is also a requirement (in new SIS regulation 9.46A) to give, together with the periodic statement, a notice concerning accrued default amounts and describing, in particular:
- the trustee’s obligation to move accrued default amounts by 30 June 2017 and to promote the financial interests of members in relation to MySuper products;
- the member’s accrued default amount; and
- the proposed MySuper product and when the proposed transfer will occur (if a suitable MySuper product has been identified) or (if a suitable MySuper product has not been identified) an explanation and a description of what the trustee will do to identify one.
This notice is in addition to the requirement (in existing SIS regulation 9.46) to give prior notice of the transfer of an accrued default amount to a MySuper product.
PDS content requirements
There are changes primarily to the disclosure of fees and costs for superannuation products (in both long-form PDSs and shorter PDSs), largely to take account of the MySuper and general fee rules. Preparation of a PDS in accordance with the revised requirements will now be optional from 1 July 2013 and mandatory from 31 December 2013.
Trustees will be required to make publicly available a range of materials including the current version of the trust deed (plus “any material not included in the current version of the trust deed”), rules relating to the appointment and removal of directors, the fund’s most recent PDS or PDSs, a summary of each significant event or material change notice to members “within the previous two years”, the name of each outsourced service provider, information about each executive officer including their qualifications and experience and information about each director including a record of their attendance at board meetings. While some of these changes are uncontroversial, others may not be. For example, significant event notices may be required to be given to a small group of members only about their own benefits. In that case, it is not clear why there is any public interest in making a summary of the notice publicly available.
If a complaint relates to a benefit other than a death benefit the trustee must inform an “eligible person” (this includes a beneficiary, former beneficiary or an executor or administrator of a deceased beneficiary) that they can ask for reasons for the trustee’s decision and that the reasons “must be given” within a specified time-frame. It is interesting to consider whether, by making this required statement, a trustee assumes an obligation to provide reasons for decisions, where a specific obligation to that effect does not exist.