The introduction of the MySuper legislation in a number of tranches diminished stakeholders’ and Parliament’s capacity to comprehensively review the proposed reforms, according to a parliamentary report on the no-frills superannuation product.
New Parliamentary Joint Committee on Corporations and Financial Services chair Deborah O’Neill used the report into the MySuper Core Provisions Bill to acknowledge a number of concerns raised by the industry.
“The introduction of the MySuper legislation in numerous tranches in effect asks Parliament to pass a segment of an overall policy scheme, in reliance on statements by the executive on the final form of the scheme,” O’Neill said in the report.
“It is also of concern to the committee that measures in tranches yet to be introduced, and apparently still under development, will affect the measures in the two bills that are the subject of a parliamentary inquiry.”
O’Neill said given the extensive nature of the policy changes announced, and the need for lengthy consultation with industry, the “significant reforms” required a practical response.
“While the approach taken may not be best practice, it is the most practical,” she said.
She said with the introduction of the Trustee Obligations and Prudential Standards Bill, there were 17 measures yet to be provided for the Parliament’s consideration regarding the MySuper Bill.
Among the 17 measures yet to reach Parliament are rules for the charging of financial advice deducted from a member account and the charging for intra-fund advice; the transition of member accounts from existing default superannuation products to MySuper products; the prohibition on deduction of commissions from MySuper member accounts; and rules for the payment of performance-based fees by registrable superannuation entity licensees to investment managers in relation to the assets of a MySuper product.
O’Neill said it was evident the introduction of the MySuper scheme in tranches had resulted in bills that were not “self-contained”.
“It was put to the committee that matters contained in one bill cannot be evaluated on the basis of the provisions in that bill alone,” she said.
“Rather, understanding one concept requires reference to all tranches of the MySuper legislation. This includes the regulation of intra-fund advice.”
A number of industry stakeholders held strong views regarding the regulation of intra-fund advice, she said.
“It was noted with concern that the form of the regulation is currently unclear as later tranches of MySuper legislation will affect the parameters in which intra-fund advice may be provided,” she said.
“Treasury confirmed that the approach to regulating intra-fund advice is a matter that has yet to be settled.
“Treasury officers advised that ‘[w]e have not got to the detailed drafting yet’, with one adviser stating ‘I do not have any more detail than was outlined in the press release of 8 December’.”
As part of the PJC report, the committee handed down three recommendations for the government to consider.
The first recommendation called for the MySuper Core Provisions Bill to be redrafted to clarify that the large employer requirement of 500 or more members of the fund needed to be satisfied upon authorisation of the MySuper product and at the end of each annual reporting period.
The second recommendation asked for a clause be inserted into the MySuper Core Provisions Bill allowing the Australian Prudential Regulation Authority to grant a grace period of up to six months for large employers whose member fund numbers had fallen below the 500-member threshold as part of the annual check.
The third recommendation called for the MySuper Core Provisions Bill and the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill to be passed.
Meanwhile, coalition members of the PJC used the dissenting report to flag their opposition to the MySuper bill.
“Despite our in-principle support for the policy, the coalition has considerable reservations about the proposed regulatory design features of both bills,” the report, authored by senators Sue Boyce and Mathias Cormann, and members of Parliament Paul Fletcher and Tony Smith, said.
“We believe these reservations are significant enough to oppose passage of the legislation. Principally these are around the authorisation process, the licensing regime, a proposed ‘scale test’ and the lack of clarity surrounding the provision of intra-fund advice.”
