Australia: Superannuation reforms outlined for consultation
Hinterhaus Productions 2016
Australia’s government has published an exposure draft — Your Future, Your Super package — for consultation, with comments invited through 24 Dec 2020. The draft includes measures previously announced in the federal budget and slated to take effect on 1 Jul 2021. However, certain key aspects of the measures are not included and are expected to be covered in upcoming regulations.
Highlights
Stapled funds to follow the employee
Employers would have to contribute to an existing “stapled” fund for new hires who start work after 1 Jul 2021, and have a stapled fund but have not selected a fund to receive contributions. Future regulations would set out the specifications, and employers would be able to ask the Australian Taxation Office to identify existing stapled funds for new hires. Tiebreak rules would apply where an employee has multiple funds. An employer could contribute to a fund of its choice for employees who do not have a stapled fund and who do not choose a fund. Employers exempt from providing employees with a choice of fund could opt in to use the stapled fund rules.
Holding funds accountable for underperformance
The Australian Prudential Authority (APRA) would conduct an annual performance test for MySuper products and for other products specified in the regulations. APRA would notify trustees of the test results by a specified deadline, and trustees would have to notify members if their product fails a test. New members could not join products that fail the test in two consecutive years. APRA would have stronger powers to direct management of underperforming products and to publish prudential standards for resolution planning by underperforming products. The methodology for calculating a product’s performance and benchmark would be specified in future regulations.
Empowering members to compare and select funds
Members would be able to use a new YourSuper online tool to compare and select funds. Regulations would set out the formulas used by the ranking tool and would include information on fees and investment returns.
Improving transparency/accountability obligations for superannuation funds
Transparency and accountability obligations for superannuation funds would increase. The evidential burden of proof would be reversed and would apply to actions brought by a regulator (not private actions against trustees brought by beneficiaries). Trustees and each director of a corporate trustee would be required to prove they acted in the best financial interests of the members — the duty also would apply to third party payments.
Related resources
Non-Mercer resource
- Your Future, Your Super package (Australian Government, 26 Nov 2020)