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December 5, 2012

Superannuation reform update

The Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Act 2012 has been passed by Parliament and received Royal Assent on 3 December 2012.

The Act:
• bans entry fees and sets criteria for the charging of other fees in superannuation, including rules for the charging of financial advice;
• requires all superannuation funds to provide life and TPD insurance to members (excluding defined benefit members) on an opt-out basis;
• enables APRA to collect information on a look-through basis;
• requires the disclosure and publication of key information in relation to superannuation funds;
• allows only funds that offer a MySuper product and exempt public sector superannuation schemes to be eligible as default funds in modern awards and enterprise agreements;
• allows exceptions from MySuper for members of defined benefit funds;
• requires trustees to transfer certain existing balances of members to MySuper by 1 July 2017; and
• provides rules in relation to eligible rollover funds (ERFs).

The Government moved amendments to define accrued default amounts as member balances where the member has either not provided any investment direction to the fund at all or where the member's entire balance is invested in the fund's default investment option.

The Act will require superannuation funds to publish their full portfolio holdings on their website twice annually as well as require the disclosure of the remuneration of directors and executives of each superannuation fund.

The fourth and final tranche of MySuper legislation has now been introduced into Parliament: the Superannuation Legislation Amendment (Service Providers and Other Governance Measures) Bill 2012 will be considered when Parliament next sits in 2013.

The Bill:

  • over-rides any provisions in a fund’s governing rules that require the trustee to use a specified service provider, investment entity or financial product.
  • provides APRA with the power to issue infringement notices for certain breaches of the Act.
  • requires superannuation trustees to provide eligible persons, generally on request, with the reasons for decisions made in relation to a complaint.
  • requires persons who have suffered loss or damage due to a director’s contravention of duties under the SIS Act to seek leave from the court before bringing an action against a director;
  • extends the availability of the legal defence for trustees and directors in court proceedings to proceedings involving breaches of MySuper obligations;
  • amends the defences by directors to actions for loss or damage suffered as a result of the making of an investment or the management of reserves to take into account the relevance of the breach of covenants or MySuper obligations to the loss or damage suffered
  • only prohibits directors of corporate trustees (and individual trustees) from voting on any company business in limited circumstances, including where a conflict of interest arises.

Licensing, registration & authorisations
From 1 July 2004, trustees of registrable superannuation entities (RSEs) must hold a Registrable Superannuation Entity licence (RSE licence) issued by APRA. In addition, all RSEs must be registered with APRA prior to commencing operations. Trustees first must have been granted an RSE licence to be able to register an RSE. APRA has published application forms here.

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Posted 5th December 2012 by David Jacobson in Financial Services, Superannuation