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AIST, together with other industry stakeholders, has written to the Minister for Superannuation seeking an urgent update on the release of the draft regulations to the Your Future, Your Super (YFYS) Bill now being examined by the Senate Economics Legislation Committee.
The letter from AIST, ISA and ASFA notes that the YFYS Bill relies heavily on regulations for matters of material importance. Without this detail, the Senate Committee will not have the time to fully assess how various aspects of the legislation will impact consumers before its final report is due by 22 April. The letter also seeks assurances that while the Committee will not have time to carefully consider the YFYS Bill regulations as part of its inquiry, that the Parliament and relevant stakeholders will be provided with adequate time to consider all the regulations.
The letter highlights that detail of how the prohibition on specified payments and investments, as well as the performance benchmarking methodology, will be contained in the regulations.
Pre-budget leaks reported by the media this week point to the Government proceeding with the legislated rise in the Super Guarantee to 10% by 1 July, this year and, at least for now, backing away from meddling with the 12% timeline.
A report in yesterday’s The Australian said the May federal budget “would wave through the initial increase in the SG to 10%” while a follow-up in today’s AFR said the government had also decided against trying to overturn the legislated increase in the SG to 12% by 2025.
Quoting government sources, both reports claim the budget will not include reforms to allow early access of superannuation for first-home buyers, as called for by some Coalition MPs, with the AFR’s Phil Coorey suggesting that Treasury is exploring options enabling women to bolster their retirement savings.
It has also been speculated that the budget will include superannuation changes that will build on the government’s YFYS reforms.
The flight to cash among super fund members during the March quarter of the 2020 COVID pandemic was far greater than at any time in history, with older members with large balances leading the charge.
Examining the liquidity challenges facing funds during the COVID crisis in its April Financial Stability report released last week, the RBA says while, overall, super funds proved resilient in the face of the market downturn as well as demand for cash through the COVID early release scheme, there is room for some funds to update their liquidity management practices (LMPs).
It notes that APRA has called on funds to re-examine their LMPs in light of the period which saw aggregate cash balances increase by $51 billion during March 2020 quarter as funds sold bonds, foreign equities and equity units in investment funds. While this was equivalent to only around 1½ per cent of funds under management (FUM) for the system as a whole, it was substantially larger for some super funds. Data collected from 30 funds show that these flows were as high as 3–4 per cent of FUM for several large funds and 8 per cent for one medium-sized fund.
An interesting observation from the RBA report is that the varying impact of the market downturn and the early release scheme across different age groups and different funds meant liquidity risks were spread across members rather than being concentrated. In particular, member switching activity was driven by older investors with larger superannuation balances, while early withdrawals were driven by younger members more exposed to the economic and financial impacts of the pandemic. Given this, and differences in the membership base of super funds, very few funds experienced both sizable member switching and ERS outflows.
The transcript of Day two of last week’s public hearings by the Senate Committee inquiry into the Your Future Your Super has been released.
The transcript of the hearings from last Thursday 8 April features testimony from AIST’s senior manager, policy, David Haynes (page 12) who raised concerns about the Bill’s lack of detail; measures that could see members stuck in underperforming funds; and flaws in the proposed financial best interest test. These concerns were echoed by other stakeholders in the profit-to-member sector appearing before the Committee including AustralianSuper (page 41); ACTU ( page 46); Cbus (page 26); and ISA (page 35).
Day one’s transcript – published in last week’s policy news – can be found here.
The House Economics Committee has taken a break from grilling super funds, calling instead on the major banks to discuss their response to the pandemic, the direction of the housing market, small business lending, and their progress implementing the Hayne Royal Commission recommendations.
In early questioning yesterday – the first of two days of public hearings - Comm Bank CEO Matt Comyn spoke about housing prices, the regulation of credit providers like AfterPay, and the rise of cryptocurrency.
ASIC has extended the temporary relief around providing a record of advice to existing clients in relation to COVID advice in certain circumstances.
This instrument aims to facilitate the provision of affordable and timely financial product advice to clients and reduces the regulatory disclosure burden on providing entities due to the COVID-19 pandemic.
The ATO has announced it will access data from the Department of Home Affairs on passenger movements during the 2016-17 to 2022-23 financial years to ensure taxpayer compliance with tax and super laws. Read more
The data accessed will be electronically matched with certain sections of ATO data holdings to identify taxpayers that can be provided with tailored information to help them meet their tax and superannuation obligations, or to ensure compliance with taxation and superannuation laws. The ATO estimates that records for approximately 670,000 individuals will be accessed each year. More information on the program can be found on the ATO website.
Stay up-to-date on the current status of superannuation Bills currently before Parliament here.