The federal government always intended to link the increase in the superannuation guarantee from 9 per cent to 12 per cent to the introduction of a mining tax.

But when such significant regulatory reforms as the Superannuation Legislation Amendment Bill 2011 get through the House of Representatives without specific mention and instead it is simply referred to as part of the mining tax package, you know the regulatory engine is running at full steam.

Next year is going to be a year of significant change.

It will be the year the industry will get clarity on uniform data standards under SuperStream, as the data and electronic transmission standards need to be settled by 1 July.
 
Account consolidation will be implemented, with intra-fund consolidation becoming compulsory in July as well.

The MySuper legislation is likely to become law and we will see the introduction of the Future of Financial Advice reforms, even though draft legislation on intra-fund advice has still not been released.

With so much change taking place in a short period of time, it is easy to lose track of the bigger picture.

Investor Weekly asked some of the key players in the industry to name the big items they are looking out for in 2012.

MySuper tops the list

The Australian Institute of Superannuation Trustees (AIST) will play an important role in the implementation of Stronger Super and will help the Australian Prudential Regulation Authority (APRA) develop prudential standards for the industry.
 
AIST chief executive Fiona Reynolds says that for many funds developing a MySuper-compliant option will be on top of the agenda for next year.

"MySuper will require a major overhaul to the current default system and involve hundreds of funds, so it is something that is uppermost in the minds of everyone that works in super," Reynolds says.

Funds will have to have a MySuper option ready by the end of 2012, as APRA will start its authorisation process on 1 January 2013.

"It's probably an understatement to stay that this is a tight deadline for funds, particularly as the MySuper legislation still has to go through Parliament and we don't expect to see APRA standards on MySuper until around April next year," Reynolds says.

"So while most of us have an idea of what MySuper will look like, we still don't have a complete picture and there isn't any concrete legislation to work off."

APRA's increased influence

Towers Watson Australia managing director Andrew Boal points out the increased responsibilities of APRA will give it a larger role to play in the superannuation industry.

"While SuperStream and MySuper are important issues for 2012 - particularly how funds and employers determine who their default members are - these are now moving into the preparation and implementation phase," Boal says.

"As a result, I think that the big regulatory issue for 2012 is APRA's new standard-making powers and how they are used in relation to superannuation risk management.

"APRA has had standard-making powers in the banking and insurance sectors for some time, but it is new for the superannuation industry and it will be interesting to see how the transition is managed."

In September, APRA issued a discussion paper on its approach to risk management and submissions on the paper are due by 23 December. 

APRA then expects to start issuing draft prudential standards for comment in early 2012.

"Some standards will be an extension from the banking and insurance standards, such as governance, fit and proper [framework], outsourcing, business continuity management, risk management, and audit and related matters," Boal says.

"Others will be superannuation specific, regarding investment governance, conflicts of interest, defined benefit funding and solvency, operational risk financial requirements, insurance in superannuation, and transition to MySuper.

"The guidance provided on the transition to MySuper will be of particular importance for the industry next year."

Engaging with members

The regulatory burden is enormous and the way funds prepare for the changes could determine the winners and the losers.

But AMP Financial Services managing director Craig Meller says the industry needs to be careful not to get carried away by internal development and must remain vigilant about promoting the benefits of superannuation to the general public.

"With the global financial crisis and ongoing market volatility, confidence in superannuation has been eroded," Meller says.

"So enhancing the perception of superannuation as the most tax-effective, long-term investment you can make is something the industry needs to focus on next year, retail and industry funds alike, especially as the federal government has taken action to increase compulsory superannuation contributions over time from 9 to 12 per cent, making super a more significant part of an individual's earnings."

He also stresses the importance of looking beyond accumulation and developing strong retirement products.

"We are well and truly into the baby-boomer retirement cycle so we would like to make sure we can equip our customers with the right tools to transition to retirement and be in the best position they can be in," he says.

"Especially in times like this when markets are volatile, creating uncertainty and stress for those about to retire or who have just retired."

Reynolds agrees the post-retirement sector needs further developing.

"Post-retirement is set to be the next big policy issue. Most of the debate and analysis of the last few years has focused on the accumulation stage. It's time to start talking about decumulation and the many challenges that it presents to funds," she says.

Boal says the industry will need to come together to drive changes that will make the development of post-retirement products easier.

"I would like to see the industry work together with the government to get the required regulatory changes in place so that deferred annuities can be offered as an effective post-retirement tool for members," he says.

"While investment market volatility and the associated risks are very important, especially in the post-retirement period, by far the biggest issue and difficulty for retirees is trying to manage their money for an unknown period of time.

"Longevity risk is a huge challenge and creates significant inefficiencies in the system, as retirees try to spend less now to save enough money in case they live for 30 or more years.

"With the first baby boomers reaching age 65 this year, there are 5.5 million Australians who will reach age 65 over the next 20 years. The baby-boom retirement wave is about to hit us and we need to provide solutions to help manage this longevity risk."   

Regulatory fatigue

The myriad changes to the regulatory environment while the industry is trying to engage clients and drive product innovation can be overwhelming.

But Russell corporate superannuation managing director Geoff Peck says that in the context of the history of superannuation in Australia, it is just another day at the office.

"As an industry we have been dealing with change around regulation and legislation for decades, and quite often those changes come through with not a lot of notice, or at least with short implementation lead times, so I'm not anticipating that this is going to be any different," Peck says.

"The industry will get its act together and get ready for this even though the lead time will be small. It is just something that we are used to doing."

Peck is under no illusions that this is the last of the regulatory change.

"The system was put into place 20 years ago and there has been continual refinement to the system over the course of those two decades and I absolutely believe that will continue into the future," he says.