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AIST Policy News - 20 February 2020

Policy News

APRA considers REM revisions

APRA is considering revisions to key measures in its draft standard on remuneration.

In a speech to the Australian Institute of Company Directors (AICD) today, APRA Deputy Chair, Helen Rowell, said the regulator had been “thinking hard” about the options for revising its proposed CPS 511 remuneration standard, especially about the 50% limit on financial performance measures.

Noting that the introduction of a limit on the use of financial metrics on long term variable remuneration was a recommendation of the Royal Commission, Mrs Rowell, said the regulator’s challenge was to “design a package of requirements that remains true to the intention of the recommendation…and is also suitable across entities of widely different size, nature and complexity.”

AIST’s submission on APRA’s draft standard on remuneration supported a new and more robust prudential standard on remuneration but also raised concerns that some of the proposed measures – including the 50% cap – were problematic.

 

RG 97 fee and cost disclosure from 30 Sept

ASIC has confirmed that RG 97 fee and cost disclosure requirements will apply to PDSs issued on or after 30 September 2020, with further consultations planned to discuss arrangements for platforms.

AIST and other industry representatives this week attended roundtable meetings with ASIC to discuss the updated RG97, which provides guidance on how to disclose fees and costs in Products Disclosure Statements (PDSs) and periodic statements.

ASIC confirmed there will be some technical amendments to the legislative instrument in the next couple of months, but the changes will be for clarification purposes only. One of the clarifications is confirmation that the new RG97 disclosure requirements will apply to those PDSs issued on or after 30 September 2020.

ASIC also confirmed it will be consulting on fees and costs disclosure arrangements on platform arrangements in 2020 and will continue to monitor the feeandcostdisclosure@asic.gov.au email address.

A copy of ASIC’s PowerPoint slides presented at the meeting will shortly be available on the ASIC website.

For further information please contact AIST’s Policy Analyst, Zach Tung at ztung@aist.asn.au

 

Labor outlines ageing strategy

Opposition leader, Anthony Albanese, has outlined Labor’s strategy to support older Australians, noting the need to stamp out ageism and improve job opportunities for older workers.

In a speech delivered in Brisbane yesterday, Mr Albanese said age discrimination was preventing many unemployed Australians over the age of 45 from building their nest egg.

Mr Albanese pointed to Deloitte Economics data which suggests a 3% increase in workforce participation by Australians over 55 would grow the Australian economy by $33 billion a year.

Without outlining any firm policy commitments, Mr Albanese signalled Labor would consider a range of measures that included fighting ageism in the workforce, improving dental health and healthcare affordability and addressing aged care waiting times.

In media coverage of Mr Albanese’s speech, AIST CEO Eva Scheerlinck welcomed Labor’s focus on older workers, noting that many older Australians experienced workplace discrimination.

 

Bill to expand PSSAP membership hits Parliament

The Government is extending membership of the Public Sector Superannuation Accumulation Plan (PSSAP) to certain current and former Commonwealth employees in order to accommodate choice of fund measures.

The Superannuation Amendment (PSSAP Membership) Bill 2020 will further expand the circumstances in which a former PSSAP member can use their existing PSSAP account in respect of any employment.

Established in 2005, PSSAP is the current default fund for new Commonwealth employees and employees of prescribed Commonwealth entities.

In 2017, changes to PSSAP were made to allow former members to use their existing PSSAP account for future contributions if they were no longer in Commonwealth employment and were undertaking employment in which they receive superannuation contributions.

 

Support for net-zero emission targets grows

More governments, companies and investors are setting targets to achieve net-zero emissions according to the latest report from the Investor Group on Climate Change (IGCC).

The report details current investor thinking, real-world examples of how investors are transitioning to net-zero emissions and the overall state of play in investor practice.

Emma Herd, CEO of the IGCC, notes that over the last decade thousands of major global companies have started reporting their climate change risks, opportunities and their carbon footprint, while only 13 out of the largest 132 coal, electricity, and oil and gas companies have made commitments to reduce their greenhouse gas emissions to net-zero.

“In Australia, the recent ‘black summer’ bushfires have clearly demonstrated the costs and consequences of allowing unchecked global warming. At just one degree of warming, Australian communities have faced frightening heat, drought and fire conditions at an unprecedented scale”, Ms Herd said.

Membership of the IGCC is open to investors operating in Australia and New Zealand. The group currently has 72 members across the investment, government and superannuation sectors, including 18 AIST member funds, AIST, ACSI, IFM Investors and Frontier Advisors.

 

Regulators clarify roles ahead of proposed reforms

ASIC and APRA have welcomed the law reform and expanded regulatory focus proposed in the Governments draft legislation relating to Royal Commission measures to be introduced into Parliament by mid-2020.

In a letter to Trustees, ASIC and APRA reaffirmed their commitment to working together and reducing regulatory burden to achieve better outcomes for members.

The regulators have recognised that they approach regulation and supervision of trustee conduct differently, while also addressing concerns regarding the potential for conflicting messages or guidance issued by ASIC and APRA.

“We recognise that conflicting messages or guidance do not promote better outcomes for members and we are committed to avoiding this wherever possible.”

“We will continue to consult with each other before issuing new guidance or amending existing guidance, and will also consider the development of joint or coordinated regulatory policy or guidance, where appropriate.”

As well as clarifying the regulators’ roles, the draft legislation proposes:

  • Removing a superannuation trustee’s capacity to charge advice fees from MySuper products.
  • Legislation to prohibit superannuation trustees from having duties other than those arising from or in the course of the performance of its duties as a trustee of a superannuation fund.
  • No hawking of super products.
  • Enforceability of financial industry codes.
  • A compulsory scheme for checking references for prospective financial advisers.
  • Requiring Australian financial services licensees to investigate misconduct by financial advisers and appropriately remediate clients affected by the misconduct.

The deadline for submissions to the draft legislation is February 28.

 

Insurance in Super Code revised

The Insurance In Super Code has been revised to align with the PYS and PMIF legislation, following the member consultation process, with Code-owners now responding to the draft industry code legislation released by the Government.

AIST and the other Code-owners, together with the Code Review Committee, finalised consideration of the changes at a meeting this week, and a copy of the final version will be circulated with next week’s AIST Policy News. The Code-owners will now conclude their approval processes. In AIST’s case this will involve sign-off by our Board.

AIST appreciates and thanks the many funds that provided feedback on the proposed changes to the Code.

The Code needs to be further reviewed in light of the proposed Enforceable Code Provisions legislation that has been released by the Government to implement Financial Services Royal Commission legislation.

Other legislation and Governmental initiatives will also impact on the Code. These may include the changes to APRA Prudential Standard SPS 250 (Insurance in Superannuation) and implementation of recommendations from ASIC Report 633 (Review of TPD Claims).

The Code-owners have adopted three guiding principles to address this changing environment:

  • Avoid duplicating legal requirements in the Code
  • No reduction in consumer protections
  • Protect Code provisions over & above law

Responding to the draft legislation requires addressing the criteria for identifying Enforceable Code Provisions and ensuring code owners monitor and report on compliance with the code.

Identifying the criteria involves determining whether provisions represent:

  • a commitment by a code subscriber to act in a particular way or in a manner consistent with the code, or
  • a commitment to a person by the code subscriber

and, whether a breach of the provision could:

  • result in significant detriment to the person, or
  • significantly undermine the confidence of the Australian public, or a section thereof, in the provision and/or providers of financial services

While there is debate about the provisions captured by these criteria, the Code-owners have come to the preliminary view that the following may be Enforceable Code Provisions:

  • Service standards (eg, claims handling)
  • Premium adjustments
  • Key Fact Sheets
  • Vulnerable members
  • Affordability mechanisms (ie, 1% salary cap)

An important part of the Code is about protecting vulnerable members.  Consequently, the Code-owners have set a work stream in parallel with the Code reviews to see how we can further uplift industry standards when it comes to accessing insurance, making enquiries or a claim, or making a complaint.

AIST (and the other Code-owners) are seeking expressions of interest from fund representatives to be involved in the vulnerable members workstream.  This workstream has only just been established, and if you are interested, please contact AIST Senior Policy Manager David Haynes at dhaynes@aist.asn.au

If the draft legislation is passed, it will come into effect from 1 July 2020.  Many aspects of the new requirements will depend on ASIC’s approach to implementation and enforcement, and the super industry will need to engage with them at an early stage in the process.

 

 

20 February 2020