Super Trustees Duties changes

The Government has introduced the second Stronger Super Bill into Parliament: Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012.

UPDATE 23 May 2012: passed by House of Representatives

The Bill if passed will implement changes to superannuation trustee duties, including in relation to trustees of MySuper products and directors of corporate trustees.

Additional duties for MySuper trustees will include to:
• promote the financial interests of MySuper beneficiaries, in particular returns to those beneficiaries (after the deduction of fees, costs and taxes);
• annually assess sufficiency of scale; and
• include in their investment strategy an investment return target and level of risk for MySuper members.

Additional duties for trustees of RSEs will include to:
• give priority to the interests of beneficiaries where conflicts arise;
• exercise the same degree of care, skill and diligence as a prudent superannuation trustee;
• have regard to valuation information, expected tax consequences and costs in their investment strategies, and offer a range of options sufficient to allow members to choose a diversified asset mix;
• have an insurance strategy and meet additional duties in relation to insurance;
• formulate, regularly review and give effect to a risk management strategy; and
• maintain and manage financial resources to cover operational risk.

The Bill also sets out the duties that apply to individual directors of corporate trustees.

With a couple of minor exceptions these additional obligations will not apply to SMSFs. The existing covenants that apply to SMSFs will continue to apply under new sections.

Background: here and here.

Subsequent tranches of legislation will include:
• further requirements in respect of insurance;
• allowing defined benefit funds and schemes to continue to be a default superannuation product;
• rules for the charging of financial advice deducted from member accounts and charging for intra-fund advice;
• arrangements for the transition of member accounts from existing default superannuation products to MySuper products;
• trustee duties for eligible rollover fund licensees that will be similar to the specific trustee duties in relation to MySuper products;
• prohibition on deduction of commissions from MySuper member accounts;
• rules for the payment of performance-based fees by RSE licensees to investment managers in relation to the assets of a MySuper product;
• limitation of certain fees to cost-recovery;
• a rule for the fair and reasonable allocation of costs between each MySuper product and each choice product within a fund;
• additional governance measures (relating to selection of service providers, not preventing directors of trustees from voting other than in certain limited circumstances, increasing the time limits for which members can lodge complaints to the Superannuation Complaints Tribunal in relation to total and permanent disability (TPD) insurance claims, requiring trustees to provide members with reasons for decisions in respect to formal complaints and providing APRA with the administrative power to impose fines);
• enhanced data collection and data publication powers for APRA;
• additional disclosure requirements in relation to MySuper and choice products;
• consequential amendments to deal with the nomination of superannuation funds in modern awards and enterprise agreements;
• consequential amendments to the Corporations Act 2001 (Corporations Act) to ensure the necessary obligations of that Act apply to MySuper products;
• ensuring APRA has the ability to determine prudential standards to facilitate the transition process;
• consequential amendments to move requirements for fitness and propriety, actuaries and auditors from the legislation to prudential standards; and
• amendments to the Corporations Act so that RSE licensees that are also responsible entities of managed investment schemes are no longer exempt from the Corporations Act requirements to have available adequate financial resources.

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