APRA today released a discussion paper on proposed arrangements for the authorisation of MySuper products. It also released a draft authorisation application form, instructions on how to complete the form and a draft prudential standard setting out requirements for trustees moving member balances into a MySuper product.
The materials released today supplement the 11 draft prudential standards for superannuation which APRA released last Friday (main standards). To read our alert on the main standards, click here.
A lot to be done – and quickly
The materials released today confirm that preparing an application for a MySuper authorisation will be a very significant piece of work for trustees. For example, the application will need to include amended governing rules which provide for the MySuper product. The application will also need to include copies of trustee policies and strategies, such as the conflicts management policy, and these must comply with the main standards. The main standards are not due to be finalised until December 2012 and will not become effective (for the most part) until 1 July 2013. However, MySuper authorisation applications can be submitted from 1 January 2013 and APRA is encouraging trustees to submit draft applications in the second half of this year and will aim to provide comments on them “as soon as practicable”.
MySuper authorisation process
The timetable for the MySuper authorisation process is:
Click here to view table.
APRA expects applications to be made electronically and they must be made using the approved form. There is no prescribed fee. After 1 January 2013, APRA will give priority to assessing completed applications over draft applications.
A separate application must be made in relation to each MySuper product. Where multiple MySuper authorisation applications are made in relation to the same fund at the same time, APRA will assess the generic MySuper product application first. This will allow APRA to consider the trustee’s likely compliance with its enhanced responsibilities before assessing the other application/s.
The application must include:
- Name of the MySuper product – APRA expects “MySuper” to appear in the product's name, but the requirement to name the product does not preclude “white-labelling” under which the product is given different names in different PDSs. For example, an employer’s name or a brand name could be used as a subset of the product's name.
- Information about the "accrued default amounts" in the fund.
- Information relating to likely compliance with the MySuper enhanced duties for trustees and directors, including various trustee policies and strategies, and the trustee’s MySuper business plan.
- Information relating to likely compliance with the MySuper fee rules, including details of contracts with service providers with a focus on whether the provider is an associate of the trustee, as well as details as to how applicable fees will not exceed cost recovery and how shared costs will be allocated between MySuper and choice products.
Transition to MySuper
APRA proposes to introduce a new standard outlining the requirements for all trustees during the transition period (1 January 2013 to 1 July 2017). By the end of the transition period, all “accrued default amounts” of members must be in a MySuper product, except in limited circumstances.
Although a trustee will, strictly, have until 1 July 2017 to effect the transition, APRA says:
“Where it is possible and in the best interests of beneficiaries to do so, APRA expects the movement of accrued default amounts to occur at the earliest opportunity.”
According to APRA the key actions proposed under the standard are:
Click here to view table.
“suitable MySuper products”
A key requirement under the draft standard is that a trustee must identify one or more “suitable MySuper products” into which the accrued default amounts of affected members within each fund will be moved. In order for a MySuper product to be “suitable”, the trustee must form the view that transferring a member’s accrued default amounts to that MySuper product will promote the financial interests of the member (or class of members).
Provide comments to APRA by 29 June 2012. There will be much to consider in designing and “building” a MySuper product. If you anticipate having a MySuper product, this timetable suggests you should have started the design phase.