Explanatory Memorandum
(Circulated by the authority of the Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)General outline and financial impact
Stronger Super
On 16 December 2010, the Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP (the Minister), announced the Stronger Super reforms.
Stronger Super represents the Government's response to the review into the governance, efficiency, structure and operation of Australia's superannuation system, the Super System Review (the Review).
To provide input on the design and implementation of the Stronger Super reforms, the Government undertook extensive consultations with industry, employer and consumer groups. The Government announced its decisions on the key design aspects of the Stronger Super reforms on 21 September 2011 (the Minister's media release number 131/2011).
This Bill is the second tranche of legislation implementing the Government's MySuper and governance reforms as part of Stronger Super. The first tranche of legislation was introduced to the Parliament on 3 November 2011 as the Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2012 (the MySuper Core Provisions Bill).
This Bill implements the next stage of the reforms. The Bill introduces the power for the Australian Prudential Regulation Authority (APRA) to make prudential standards, amends section 52 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) to expand the duties for registrable superannuation entity (RSE) licensees, applies new trustee duties to RSE licensees of an RSE that offers a MySuper product and applies duties to the directors of corporate trustees.
Date of effect: The provisions introducing the prudential standards-making power will apply from the day after Royal Assent. Duties for trustees and directors of RSEs, and trustees and directors of RSEs offering MySuper products will apply from 1 July 2013.
Proposal announced : On 16 December 2010, the Minister announced the Stronger Super reforms. On 21 September 2011, the Minister announced the Government's decisions on the key design aspects of the Stronger Super reforms.
Financial impact : This Bill has no significant financial impact on Commonwealth expenditure or revenue.
Summary of regulation impact statement
Impact: The regulation impact statement (RIS) for Stronger Super implementation can be found at http://ris.finance.gov.au. The relevant sections of the RIS covered in this Bill are governance of superannuation (including the section in the appendix) and subsections 2.1 and 2.2 of the insurance appendix. A RIS exemption was granted for the remainder of the Stronger Super reforms, which will be subject to a post-implementation review.
Measures to be contained in subsequent tranches of legislation
The MySuper and governance reforms will be implemented in several tranches of legislation. This Bill is the second tranche.
Further reforms that are not contained in this Bill that will be addressed by subsequent tranches of legislation include:
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- further requirements in respect of insurance;
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- allowing defined benefit funds and schemes to continue to be a default superannuation product;
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- rules for the charging of financial advice deducted from member accounts and charging for intra-fund advice;
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- arrangements for the transition of member accounts from existing default superannuation products to MySuper products;
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- trustee duties for eligible rollover fund licensees that will be similar to the specific trustee duties in relation to MySuper products;
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- prohibition on deduction of commissions from MySuper member accounts;
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- rules for the payment of performance-based fees by RSE licensees to investment managers in relation to the assets of a MySuper product;
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- limitation of certain fees to cost-recovery;
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- a rule for the fair and reasonable allocation of costs between each MySuper product and each choice product within a fund;
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- additional governance measures (relating to selection of service providers, not preventing directors of trustees from voting other than in certain limited circumstances, increasing the time limits for which members can lodge complaints to the Superannuation Complaints Tribunal in relation to total and permanent disability (TPD) insurance claims, requiring trustees to provide members with reasons for decisions in respect to formal complaints and providing APRA with the administrative power to impose fines);
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- enhanced data collection and data publication powers for APRA;
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- additional disclosure requirements in relation to MySuper and choice products;
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- consequential amendments to deal with the nomination of superannuation funds in modern awards and enterprise agreements;
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- consequential amendments to the Corporations Act 2001 (Corporations Act) to ensure the necessary obligations of that Act apply to MySuper products;
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- ensuring APRA has the ability to determine prudential standards to facilitate the transition process;
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- consequential amendments to move requirements for fitness and propriety, actuaries and auditors from the legislation to prudential standards; and
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- amendments to the Corporations Act so that RSE licensees that are also responsible entities of managed investment schemes are no longer exempt from the Corporations Act requirements to have available adequate financial resources.