The Parliamentary Joint Committee on Corporations and Financial Services has released its report on the Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Bill 2012. Apart from making a minor recommendation about "product dashboards", the Committee has recommended that the Bill be passed.
The Committee acknowledged some of the concerns raised about the Bill but did not think they justified the Bill being amended or delayed:
The committee believes that while these concerns may have some legitimacy, they are not grounds to amend or delay the passage of the legislation. As this report has emphasised, the provisions in the bill are based on important principles that should not be diluted. There is an expectation that the regulators and stakeholders will develop sound practices that adhere to the provisions.
Accrued default amounts
The Committee rejected the suggestion that the definition of “accrued default amount”, being an amount which must be transferred to a MySuper product by 2017, was too broad. The definition will cover a situation where a member has positively chosen the investment option in a fund which also happens to be the fund's default investment option. In reaching its view the Committee said:
- members will be contacted to notify them that their default investment will be transferred to a MySuper product and they will have the opportunity to opt out of transfer;
- concerns that members will fail to opt out of the transfer are exaggerated;
- trustees will have until 1 July 2017 to transfer amounts to a MySuper product, which is a "considerable, but appropriate period of time";
- the bill will not "pose difficulties for members that are transferred to MySuper products in terms of losing insurance";
- the "basic intent" of the MySuper legislation is "to ensure that members of superannuation funds, particularly inactive members, are not paying commissions for services they are not aware of or do not get any benefit from".
Fees, costs and intra-fund advice
Having outlined a series of concerns about the provisions of the Bill relating to fees, costs and intra-fund advice, the Committee nevertheless stated that it "strongly supports" the provisions. The Committee said, for example (and without apparent irony), that the provision about intra-fund advice is "clear and well drafted".
The Committee has recommended that APRA continue its consultation with stakeholders on the product dashboard with a view to considering:
- a requirement that the investment return target be net of investment and administration fees;
- how best to quantify the likelihood of a negative return as part of the risk measure;
- a clear definition of the liquidity measure;
- the options to minimise discrepancies between the information in the product dashboard and the information contained in the new short product disclosure statement regime.
This recommendation appears to overlook the fact that the relevant matters will be prescribed by the Corporations Act and that the relevant regulator will, in any event, be ASIC not APRA.
A copy of the report is available here.