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

Type Subject matter Source Description

Treasury update

Royal Commission into Banking and Financial Services

Prime Minister's website

On 30 November 2017, the Prime Minister and Treasurer announced that the Government will establish a Royal Commission into the alleged misconduct of Australia's banks and other financial services entities. According to the media release:

  • the Royal Commission will consider:
    • the conduct of banks, insurers, financial services providers, and superannuation funds (not including self-managed superannuation funds); and
    • how well equipped regulators are to identify and address misconduct; and

  • the Government will ensurethat the Royal Commission will not "defer, delay or limit, in any way, anyproposed or announced policy, legislation or regulation that we are currentlyimplementing".

The Draft Terms of Reference for the Royal Commission were alsopublished.

Policy update

Speech by Minister for Revenue and Financial Services at the Association of Superannuation Funds of Australia (ASFA) conference

Minister's website

On 1 December 2017, Kelly O'Dwyer, Minister for Revenue and Financial Services, delivered a speech at the annual ASFA conference noting the Government's initiatives and also stating, among other things:

  • that with respect to the Royal Commission into the conduct of financial services entities, "despite the views of some in the superannuation industry, there is no compelling case to carve out such a significant part of our financial system from [the] inquiry"; and
  • that the Government's proposed "comprehensive package of reforms that are squarely focussed on protecting members' money and members' interests through increased transparency, accountability and stronger powers for…APRA" are long overdue and will apply "equally to all retail, bank-owned, industry, corporate and public sector superannuation funds". The package of reforms referred to includes the changes to the law that will require new reporting of fund expenses, annual member meetings and portfolio holdings disclosure, increased APRA power to take action against fund trustees, the requirement for trustees to assess their MySuper products each year to ensure that they promote the financial interests of members, and new requirements for trustee boards to have a minimum number of independent directors.
APRA Speech by APRA Deputy Chairman at ASFA conference

APRA website

On 29 November 2017, APRA Deputy Chairman Helen Rowell delivered a speech at the annual ASFA conference in relation to APRA's proposed changes to its superannuation prudential framework, ahead of the release of a detailed consultation package, which is expected soon. In the speech Ms Rowell outlined some of the key features of APRA's proposals which, she said, "are designed to put pressure on poor performers — irrespective of industry segment — to lift their game or, if needed improvement is not possible within a reasonable timeframe, to gracefully exit the industry".

In the speech Ms Rowell stated, among other things, that:

  • the proposed revised prudential framework will require fund trustees to "bolster their strategic and business planning practices, decision-making and oversight for fund expenditure, and approach to defining, assessing and delivering quality outcomes for members";
  • trustees that are "identified…as being unable to consistently deliver sound and sustainable member outcomes will be encouraged to make potentially fundamental changes to the way they operate their business - if necessary by merging with, or transferring their members to, another fund";
  • with respect to fund size:
    • APRA expects trustees to adopt "more realistic forecasts for of the future state of their funds and how members will be impacted, and strategies and business plans appropriately anchored in what is realistically likely be achieved"; and
    • industry data suggests a correlation between scale, future viability and member outcomes, making it "critical that trustees take a frank look at what they want to achieve and the resources required to deliver those objectives", and that APRA's data across a range of metrics shows the different challenges faced by smaller funds — compared with larger funds, from generally lower returns, to higher operating costs and a general trend towards greater contraction of membership.

Ms Rowell considers that there are too many investment options within super, and that under APRA's proposed member outcomes assessment, and as part of sound strategic and business planning, APRA will expect trustees to seriously consider the optimal number of investment options that they should be providing to efficiently deliver "quality outcomes" for members. They should also question whether members might be better off with a smaller number of options delivering appropriate risk/return outcomes and a reduction in fees and fund administration costs.

APRA expects that superannuation boards will continue to grow more diverse generally, which APRA considers positive for member outcomes, and with respect to independent directors in particular, that preliminary analysis suggests that trustees with outcomes at the better end of the industry, on average, appear to be those that have appointed independent or non-affiliated directors.

ATO Speech by Deputy Commissioner of ATO at ASFA conference ATO website

On 30 November 2017, James O'Halloran, Deputy Commissioner Superannuation of the Australian Taxation Office (ATO), delivered a speech at the annual ASFA conference, noting, among other things, that:

  • with respect to the reporting of transfer balance caps, funds should use the ATO's transitional reporting mechanism, the transfer balance account report (TBAR Report), for information required to be reported from 1 July 2017;
  • most funds are expected to start reporting using the TBAR Report from mid-December 2017, and from January 2018 individuals will be able to log on to the ATO online services and view their transfer balance account amount for the 2016/2017 financial year;
  • the ATO is building two new digital services for reporting between superannuation funds and the ATO: the member account attribute service (MAAS) and the member account transaction service (MATS), which will replace the existing annual member contribution statement (MCS) reporting system;
  • the new digital reporting services being developed by the ATO will involve more regular and 'up-to-date' reporting, compared with the existing annual reporting systems; and
  • in the coming weeks, the ATO will send formal advice to trustees about anticipated readiness dates and provide more information about how the ATO can assist trustees to prepare for the reporting changes.
Case law update Decision to decline TPD claim upheld Williams v Mercer Superannuation (Australia)Limited & Ors [2017] QDC 289

On 1 December 2017, the District Court of Queensland handed down its decision in Williams v Mercer Superannuation (Australia) Limited & Ors [2017] QDC 289 in which it dismissed claims made by the plaintiff against a superannuation fund trustee and insurer in relation to a declined claim for a total and permanent disablement benefit.

The Court ultimately found that the plaintiff was not totally and permanently disabled within the meaning of the relevant group life insurance policy issued by the insurer to the fund trustee. Some of the key aspects of the decision included:

  • the member's ability to return to work on a part-time or even casual basis disentitled her to the relevant total and permanent disablement benefit; and
  • the trustee of the fund was not required to form an opinion as to whether or not the plaintiff satisfied the definition of "total and permanent disablement" on the basis that the rules of the fund did not require it (rather it was the insurer that was required to form such an opinion, and hence the trustee was not required to consider relevant information and make relevant inquiries in relation to whether or not the plaintiff was relevantly disabled).