ato logo
Search Suggestion:

Superannuation Industry Stewardship Group key messages 7 June 2023

Key messages from the Superannuation Industry Stewardship Group meeting 7 June 2023.

Last updated 2 August 2023

Key messages from the Superannuation Industry Stewardship Group meeting 7 June 2023

Welcome and Introductions

The Chair opened the meeting, welcomed members, and reviewed apologies. No conflicts of interest were declared.

Superannuation Regulators Update

Treasury

Treasury noted the following areas of focus/consultation relating to 2023 Budget announcements:

  • Better Targeted Superannuation ConcessionsThis link will download a file –The government announced that there will be a reduction in superannuation tax concessions available to individuals whose total superannuation balances exceed $3 million. Exposure draft legislation is expected in the coming months, this will provide clarity regarding how the liability will work for individuals.
  • Payday SuperExternal Link – This announcement will require super to be paid at the same time as salary and wages from 1 July 2026. Treasury and ATO will consult closely with industry and stakeholders.
  • Non arm’s length Expenditure Rules - This measure will amend the non-arm’s length income (NALI) provisions which apply to the expenditure incurred by super funds. This measure is open for consultationExternal Link from 19 June 2023 to 7 July 2023.

Australian Prudential Regulation Authority

Supervisory matters include:

  • Retirement Income Thematic review - Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commissioner (ASIC) are undertaking a joint - implementation review looking at a sample of 15 trustees’ retirement income strategies. Key questions included in the review include how trustees are assisting disengaged members, how a successful product is measured, and how trustees are integrating retirement income strategies into their business planning cycle.
  • Performance Test – to be administered following finalisation of regulations.
  • Multi-factor Authentication (MFA) – On 26 May 2023, APRA issued a letter to all APRA regulated entities advising MFA is one of the most effective controls an organisation can implement to prevent an adversary from gaining access to a device or network and accessing sensitive information.

Policy reforms and consultation activities include:

  • Investment governance SPG 530 – in final stages of being updated post consultation, looking to release this quarter
  • Operational Risk Management CPS 230External Link – following feedback received during consultation, APRA intends to move the effective date of the new standard to 1 July 2025. Transitional arrangements apply for pre-existing contractual arrangements with service providers, with the requirements in the standard applying from the earlier of the next contract renewal date or 1 July 2026.
  • Recovery, exit and resolution planning CPS 190/900 – guidance has now issued, but transfer planning reforms will continue to assist trustees with implementation.
  • Strategic objectives and member outcomes SPS 515 – Consultation upcoming on changes to guidance, including transfer planning and fund expenditure.
  • Resources for risk events SPS 114 – a wide range of feedback was received from original proposals, with further consultation planned for later this year.
  • Remuneration disclosures CPS 511 – to be released mid-year. Working closely with Treasury and ASIC to ensure alignment with other disclosure related reforms and requirements.

Super Data Transformation

APRA released a Minor Amendments response paper on 3 March 2023 which included removal of best endeavours for expenses and asset allocation, updates to reporting due dates and reduction of frequency of ad-hoc reporting.

APRA will delay formal consultation on proposed reporting standards for investments and Registrable superannuation entity (RSE) Licensee and RSE profile until November 2023, incorporating a request from industry to avoid consultation on reporting proposals over the peak year-end reporting period.

For further updates on the Super Data Transformation refer to APRAExternal Link.

ASIC

Key points:

Australian Financial Complaints Authority

Australian Financial Complaints Authority (AFCA) provided the following update on Superannuation complaints statistics:

  • For the period July 2023 to May 2023, 6,112 superannuation complaints were received, representing 7% of total complaints to AFCA for this period.
  • 41% of these complaints were resolved at registration and referral, showing funds are being proactive in their engagement with complainants.
  • One in four complaints relates to a delay in complaint handling, increasing 200% from May 2022. This is now a watch area for AFCA.
  • A majority of complaints received relate to issues for superannuation account products, including duplicate accounts, slow rollover process, delayed pensions or wrong names on accounts (62% of total complaints). This is followed by complaints around Total and Permanent Disability (TPD) and Income Protection (IP) claims (28%), and Death Benefit complaints (9%).

AFCA have noted an increase in scams within the superannuation market, with this increase largely attributed to fraudulent behaviour by family members or financial advisors. There have been increases in hacking of personal email accounts with bank account details then being modified.

ATO

From 1 July 2022, funds have been able to accept contributions without having to determine whether an individual aged between 67 and 75 satisfies the work test. However, the work test must be satisfied if individuals want to claim a personal super contribution deduction. This remains the case despite the recent identification of an unintended error in the law. The Commissioner issued a legislative instrument using his remedial power to address this issue. The legislative instrument will come into effect later in 2023 when the Parliamentary disallowance period expires.

The legislative instrument ensures contributions made after 1 July 2022, by individuals who are employees under the expanded definition of employee in section 15A of the Superannuation Industry (Supervision) Act 1993 or section 19 of the Retirement Savings Accounts Act 1997, remain eligible to claim a deduction. A communication issued to funds reminding them that upon receiving a valid notice of intent to deduct contributions from a member, an acknowledgment of the notice must be provided to the member without delay.

Other updates include:

  • The Superannuation Standard Choice Form and web content has been updated following consultation. The new form can be completed digitally and features improved readability for users.
  • The issue of confidentiality and integrity remains a focus for all consultation arrangements for the ATO. There is a focus on transparency within our consultations, with clear definitions in place when confidential information is shared.
  • ato.gov.au is being upgraded to a new platform with delivery of a new website expected in early December 2023. This new design is informed by user needs and business requirements and will make it easier for clients to find and act on the information provided.

Environmental scan

Industry members noted the following:

  • More support is required for superannuation members as they transition into retirement phase:
    • How can members connect with the right retirement products?
    • How can funds connect with disengaged members?
    • What happens if a members retirement plan changes, due to illness, relationship breakdown or death of a loved one?
     
  • This has been highlighted as a potential focus item for a future meeting of the SISG.
  • There is conversation around how to make superannuation fair for everyone, including parents on paid parental leave, gig workers, and workers under 18 years of age working less than 30 hours per week.
  • The Tax Institute (TTI) is an organisation comprising individual members, lawyers and regulators. TTI make submissions across the whole of tax system, and have released a paper calling for reform of Australia’s tax system, including superannuation, titled The Case for Change.
  • Electronic signatures need to become more common – some forms still require trustees to provide a physical signature.
  • The role of Artificial Intelligence (AI) such as ChatGPT needs to be examined more closely for its implication in providing misleading financial advice.

Objective of Super

The Objective of SuperThis link will download a file paper was open for a 6 week consultation in early 2023.

The Government’s proposed objective of superannuation is: “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

The following was noted in discussion:

  • Industry stakeholders were broadly in support of the proposed Objective of Super.
  • The Objective of Super will not change trustee obligations, including the Sole Purpose Test. The provision of insurance in superannuation is consistent with the current wording, even without an explicit reference.

Explanatory materials to a proposed bill would provide further guidance on the intent behind the Objective of Super. The Government has been briefed on the outcome of the initial consultation, and there will be consultation on the exposure draft and explanatory materials before legislation is introduced to Parliament.

Superannuation issues for First Nations people

Australian Institute of Superannuation Trustees (AIST) talked members through the issues experienced by First Nations people interacting with the super system and potential strategies to close the super gap.

In Australia, there are 984,000 Indigenous and Torres Strait Islander people. It is recognised that the following can be experienced by this group:

  • Lower super balances
  • Life expectancy differences and chronic illness
  • Lower literacy and financial literacy rates
  • Less opportunity to benefit from compulsory retirement savings
  • Difficulties accessing death benefits due to non-recognition of traditional kinship structures
  • Challenges with traditional identification – change and misspelling of names, ID documents
  • Lack of access to computers and internet

AIST is involved in multiple initiatives to advocate for First Nations people and address a range of issues faced in relation to superannuation:

  • Indigenous Superannuation Working Group (ISWG): The ISWG was established in 2013, with a membership including industry bodies, administrators, superannuation funds and representation from the First Nations Foundation and Financial Counsellors Australia (FCA). Initiatives from the working group include:
    • Financial Counselling Australia’s online register provides super funds with access to FCA’s online register
    • Collaboration with the First Nations Foundation to support critical outreach programs. The Big Super Day Out has helped 1135 First Australians with their superannuation queries and located $14.5 million in lost superannuation for Indigenous Australians
    • Working with AUSTRAC to develop guidanceExternal Link to assist financial service providers when interacting with customer groups who don’t have standard forms of identification.
     
  • Indigenous Super Summits: Brings industry stakeholders together to build awareness and stimulate discussion on key superannuation issues experienced by First Nations People. At the Summit, Indigenous community members shared experiences, highlighting challenges and frustrations faced with regards to superannuation.

ASIC’s Indigenous Financial Services FrameworkThis link will download a file and its Key Learnings inform ASIC’s work and priorities relating to First Nations consumers. These Key Learnings were developed through a series of consultations held by ASIC:

  • First Nations peoples had unique, established economies before colonization. These economies continue today, and should be understood, respected and maintained.
  • First Nations peoples have been prohibited and excluded from participating in the Australian Financial system.
  • Financial wellbeing affects all aspects of First Nations peoples’ lives.
  • First Nations peoples have many different versions of financial success. This needs to be accepted and encouraged. All First Nations peoples should be empowered to achieve their vision of success.

Superannuation funds are encouraged to read the Framework and embed these principles within their trustee processes, committing to improve superannuation outcomes for First Nations people.

The following highlights practical examples of factors for funds to improve superannuation outcomes for First Nations people:

  • Cooperative approaches between Indigenous people, government and the sector
    • Make sure the Indigenous voice is heard and part of the journey
     
  • Data driven solutions and processes that escalate in a culturally appropriate way
  • Ongoing education and engagement of the superannuation sector. Funds can:
    • Ask if a member identifies as Aboriginal or Torres Strait Islander in order to target services and support
    • Have dedicated phone lines for First Nations members
    • Engage an interpreter – there are over 100 indigenous languages
    • Use the guidance provided by AUSTRAC when members are unable to provide traditional identification documents
    • Improve trustee processes and reduce barriers for First Nations people to access and engage with their super
    • Improve training within funds around cultural awareness and competency training for interactions with indigenous members
    • Have a reconciliation action plan in place
    • Participate in working groups and events to promote improvement of superannuation outcomes for First Nations Peoples.
     

Fraud and cyber security

The findings of the Fraud and Security Working Group (FSWG) were presented to the Superannuation Industry Stewardship Group (SISG). Key points include:

  • The FSWG commenced Phase 2 of the work program in March 2023, undertaking a detailed assessment of opportunities identified for improved security controls.
  • Both regulators and industry are encouraged to continue conversations on how to improve security controls, and report back to the SISG on progress.
  • The Attorney-General’s Department is undertaking a public consultation on Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime. Members were encouraged to make submissions to this consultation.
  • An agenda item will be included in the SISG in November 2023 for members to report back with progress against the opportunities identified. Key industry associations to canvass members on what progress has been made and where further improvements can be made.
  • The SISG confirmed that the FSWG had achieved its intent of developing a shared understanding of the threats applicable at the different stages of the superannuation account lifecycle; identifying and prioritising a pool of opportunities to address risks and uplift controls; and agreeing on immediate next steps to pursue priority opportunities. Based on this, the group is approved to be dissolved.

Insurance in Super

ASIC provided an overview of REP 760 Insurance in Superannuation: Industry progress on delivering better outcomes for membersExternal Link. Key recommendations for superannuation trustees include:

  • Use of data to monitor outcomes from insurance and proactively identify how to better meet members’ needs and provide value for money.
  • Design and deliver claims processes with a focus on member experience.
  • Embed a process for continuously improving member communications and processes.
  • Ensure there are robust systems, processes and controls to effectively administer insurance arrangements.

Attendees

Attendees list

Organisation

Attendee

ATO

Emma Rosenzweig (Co-chair), Superannuation and Employer Obligations

ATO

Larissa Evans, Superannuation and Employer Obligations

ATO

Michelle Allen, Superannuation and Employer Obligations

ATO

Peta Lonergan, Superannuation & Employer Obligations

Association of Super Funds Australia

Glen McCrea

Australian Financial Complaints Authority

Heather Gray

Australian Prudential Regulation Authority

Carolyn Morris

Australian Prudential Regulation Authority

Katrina Ellis

Australian Securities & Investments Commission

Jane Eccleston

Australian Securities & Investments Commission

Jessica Spence

Business Council of Australia

Stephen Kirchner

Council on the Ageing (COTA) Australia

Patricia Sparrow

Industry Super Australia

Ella Cebon

Law Council of Australia

Maged Girgis

Link Group

Deborah Schembri

Mercer

David Knox (Co-chair)

SMSF Association

Peter Burgess

Super Consumers Australia

Xavier O’Halloran

The Tax Institute

Phil Broderick

Treasury

Lynn Kelly

Treasury

Luke Spear

Guest attendees

Guest attendees list

Organisation

Attendee

ATO

Alastair Ramsay, Superannuation & Employer Obligations

ATO

Kylie White, Superannuation & Employer Obligations

ATO

Malcolm Allen, Superannuation & Employer Obligations

ATO

Shane Moore, Superannuation & Employer Obligations

Australian Securities & Investments Commission

Brad Ruting

Australian Institute of Superannuation Trustees

Eva Scheerlinck

Australian Institute of Superannuation Trustees

Kate Brown

Australian Securities & Investments Commission

Nathan Boyle

Australian Securities & Investments Commission

Sacha Vidler

Chartered Accountants Australia & New Zealand

Nelunika Anthony

Financial Services Council

Aidan Nguyen

Treasury

Adam Hawkins

Treasury

James Thomson

Treasury

Katarina Trinh

Apologies

Apologies list

Organisation

Member

Australian Institute of Superannuation Trustees

Melissa Birks

Chartered Accountants Australia & New Zealand

Tony Negline

Financial Services Council

Spiro Premetis

QC73086