The Australian Securities and Investments Commission (ASIC) has placed superannuation funds on notice, informing super trustees that they need to apply the Protecting Your Super package reforms which are due to take effect on 1 July 2019, and their members should be thoroughly informed.
ASIC stated that any information given to members in adding the reforms need to be balanced and accurate, with the regulator being prepared to act where it finds communications as misleading. ASIC is collaborating with the Australian Prudential Regulation Authority (APRA) and the Australian Taxation Office (ATO) to carry out the legislative updates.
ASIC Commissioner Danielle Press added, “How a trustee communicates with their members about the PYSP changes will give us an indication of the trustee’s commitment to members’ best interests.”
Protecting Your Super package reforms
The Protecting Your Super package reforms are intended to safeguard super savings from erosion by aiming at “inappropriate fees and insurance premiums”, along with decreasing the amount of unintentional multiple low balance accounts.
“Erosion of superannuation through unnecessary fees and premiums for potentially unsuitable insurance is a significant issue for many Australians,” Ms Press stated.
“Most consumers are not aware of the fees and insurance premiums charged to their superannuation accounts or the steps they can take to avoid unnecessary reduction in their super balance.”
The ATO approximates that roughly $6 billion will be consolidated due to the changes starting 1 July.
The modifications include banning exit fees for transferring money from a super account, insurance will be opt-in for accounts that have been non-active for 16 months, and fee caps being imposed on certain fees for account balances under $6,000.
In addition, members with balances under $6,000 that have not been active for 16 months will have their accounts paid to the ATO. The ATO will then take proactive steps to consolidate this with the members’ active super fund.
According to Ms Press, super trustees should not encourage its members to maintain insurance as many members with inactive accounts will be better off allowing the insurance to lapse.
She adds, “Similarly, trustees should not be urging all members with low-balance accounts to keep their account within the fund as this may not be in the best interests of members.”
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