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Retirement Income Review: AIST put focus on 12% & vulnerable Australians
AIST has renewed its call for the Government to stick to the legislated timetable for 12 per cent super, which is especially important for low income earners and those whose journey to financial security in retirement is impacted by factors such as broken work patterns, unaffordable housing and involuntary retirement.
Our submission to the Retirement Income Review also calls for adjustments to the 2016 changes to the Age Pension Asset test. We note the current taper rate for the asset test severely distorts the superannuation savings system for middle Australia and threatens system integrity.
Tax inequities in the system similarly need to be addressed so we no longer see the wealthiest Australians receive the most Government support in saving for retirement.
Additionally, an opinion piece by AIST CEO Eva Scheerlinck published by the Age/Sydney Morning Herald highlights the need for the Retirement Income Review panel to consider community expectations on retirement living standards for all Australians, not just those working continuously for 40 years on average or above average salaries.
Other key points in our submission – which were covered in the Age/SMH, and the Australian Financial Review - include
Choice Bill and unpaid SG amnesty on Parliament’s agenda
Debate is set to resume on key superannuation legislation this week as the year’s first session of Federal Parliament gets underway.
The unpaid super amnesty Bill is scheduled for debate on Wednesday in the Senate while debate on the Your Super, Your Choice Bill is scheduled for Thursday in the House of Representatives.
The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 would provide a one-off period where employers can correct historical superannuation guarantee non-compliance.
In November of 2019, the Senate Economics Committee recommended the Bill be passed. The Bill was passed through the House of Representatives on 28 November.
AIST’s submission recommended that the Senate Committee reject the Bill, arguing that a SG amnesty would be neither well-targeted nor effective.
AIST pointed to international evidence showing that amnesties do not work and can even exacerbate the problem as previously honest citizens reduce their compliance in anticipation of another, future amnesty.
The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 provides an amendment to the SG Administration Act stopping employers from restricting the choice of superannuation funds for employees under workplace determinations or enterprise agreements.
As noted in last week’s Policy News, AIST’s submission supports the principle of choice in superannuation but highlights that members in the choice segment are at risk of having materially lower retirement incomes.
AIST has proposed that the existing exemption remain for enterprise agreements where superannuation benefits in excess of the community standard are negotiated between the employer and their employees.
Last week, the Financial Review reported that Labor was open to supporting the Bill, but would await the outcome of the Senate inquiry into the Bill before committing.
Meanwhile, a suite of bills related to the Royal Commission and ASIC’s enforcement powers are scheduled for debate in the House of Representatives. These include:
The Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2019 Measures)) Bill will implement the government's response to a further four recommendations of the royal commission:
Secondly, the Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) relates to ASIC’s enforcement powers.
Specifically, the bill amends the law to:
APRA funds still lacking gender balance
The latest APRA stats show that men still outnumber women on the boards of APRA-regulated entities.
APRA’s annual superannuation bulletin shows the gender balance of superannuation trustees currently sits at 34 per cent women and 66 per cent men.
Despite being outnumbered two-to-one on boards, there has been a 10 per cent increase of female-representation over the last five years.
Regarding governance, 63 per cent of directors are a covered by an equal representative model of governance.
Average director remuneration currently sits at $54,585 per annum.
Other highlights in the annual bulletin include:
*note: these figures have been amended from a previous version.
APRA turns its attention to Choice data
APRA has confirmed that the development of a heatmap for Choice data will be a key undertaking for the regulator this year, but it foreshadows challenges ahead. In a recent speech made at a Chairs’ Forum, APRA Deputy Chair, Helen Rowell described the task of developing the means and methodology to compare the estimated 40,000 choice super products as ‘herculean’.
“Tackling this challenge will be a major, but very important undertaking for APRA this year given the significance of the choice segment of the industry for member outcomes,” Ms Rowell said.
However, Ms Rowell admitted that it would not be feasible to assess the performance of all options individually, but that the number APRA would deal with would be ‘substantial’.
Ms Rowell also indicated that APRA would need to modify the presentation of the data from the previous Excel spreadsheet, given the much larger scope of products considered.
Govt proposes bans/limits on deducting advice fees from super
As outlined in last week’s AIST policy alert, Treasury has released an exposure draft to implement the Government’s response to key recommendations from the Financial Services Royal Commission, including proposals to ban MySuper advice fees and limit advice fees for other super products.
The draft legislation includes 14 categories of measures, of which at least 10 relate to superannuation. The response relates to Royal Commission measures to be introduced into Parliament by mid-2020.
The Government proposes removing a superannuation trustee’s capacity to charge advice fees from MySuper products. However, superannuation trustees would still be permitted to charge fees in relation to intra-fund advice as administration fees.
It is also proposing to remove the capacity of a superannuation trustee to charge advice fees to a member (other than fees for intra-fund advice) unless certain conditions are satisfied. For ongoing fee arrangements, the new conditions would include new requirements concerning annual renewal, identification of services that will be provided and consent to the charging of fees.
Other legislation proposals include:
Requiring Australian financial services licensees to investigate misconduct by financial advisers and appropriately remediate clients affected by the misconduct.
The deadline for submissions is February 28. AIST invites member feedback which should be directed to AIST Senior Policy Manager David Haynes at DHaynes@aist.asn.au
Registration opens for Mother’s Day Classic with focus on fire-affected towns
Early bird registration is now open for the Women in Super Mother’s Day Classic with events to be run in up to 100 locations around Australia, including in major cities and regional towns.
Established in 1989 with a long history of strong support from the profit-to-member super sector, the MDC annual walk and fun run raises awareness and funds for life-changing breast cancer research. More than $37 million has been raised since 1989, with the goal this year to raise a further $3 million by 2020 to take the total funds raised to $40 million.
This year there will be special emphasis on MDC events in regional areas that have been impacted directly or indirectly by the bushfires. MDC is encouraging participants to pack up Mum, family and friends, register for a regional event and spend the Mother’s Day weekend in one of the fire affected regions. By registering to walk or run in one of these events you will be assisting in the rebuilding and recovery efforts of local communities and businesses.