A new Government sets a new agenda for superannuation - The Super System Review’s unfinished business

28 November 2013 | By Michael Chaaya (Partner)


The Federal Government has today released a discussion paper entitled Better regulation and governance, enhanced transparency and improved competition in superannuation on regulation, governance, transparency and competition in the superannuation sector, inviting consultation from the industry.  Hot on the heels of the release of the terms of reference for the Financial Systems Inquiry, this is another development which will have the superannuation industry in a frenzy.  Many of the issues raised in the discussion paper were canvassed as part of the Super System Review led by Jeremy Cooper and the industry could be forgiven for feeling a sense of déjà vu. 


Through four main legislative tranches and associated amending legislation and regulations to implement the Government’s stronger super reforms following the Super System Review, the former Labor Government made significant changes to the superannuation system including, broadly, the following key aspects:

  • introduction of ‘MySuper’, a default superannuation product designed to be a simple and cost-effective superannuation offering with easily comparable key characteristics;
  • introduction of ‘SuperStream’, a package of measures designed to enhance transactions and the back-office administrative functions;
  • a range of measures relating to self managed superannuation funds to improve the operation and efficiency of the sectors; and
  • governance standards and transparency measures, including providing APRA with powers to set prudential standards for superannuation funds.

A portion of the reforms have already commenced such as:

  • the APRA prudential standards for superannuation taking effect;
  • the requirement that Registrable Superannuation Entity (RSE) licence holders be authorised to offer a MySuper product and that employers pay default contributions to a fund in which the RSE licensee is authorised to offer a MySuper product. 

However, certain elements of the Stronger Super reforms are outstanding including, without limitation:

  • introduction of regulations providing the display requirements for information and content on the dashboard for superannuation ‘choice’ products (ie products other than MySuper products); and
  • finalisation of regulations prescribing the portfolio holdings disclosure requirements for superannuation fund trustees.

As part of the current Government’s policy for superannuation which the Government describes as a commitment to improving regulation, governance and enhancing transparency but a pledge not to make unexpected detrimental policy changes, the Government has released a discussion paper for industry submissions ahead of making any exposure draft legislation or regulations. 

The discussion paper seeks feedback in relation to superannuation prudential and governance policy proposals, outstanding aspects of the MySuper reforms, competition in default super funds in modern awards and a possible deferral of the commencement date of the MySuper transparency measures beyond 1 July 2014 as well as the regulatory costs of proposed policy measures. 


The table below summarises the issues and measures raised in the discussion paper on which feedback is sought. 

Summary of issue and/or proposed measure

Comments sought on

A better approach to regulation


Ensure the compliance costs in relation to new regulations are not burdensome to ensure members do not suffer the consequences of an inefficiently operating superannuation system.  


  • a dollar amount estimate of the costs incurred in complying with any proposed regulation in the discussion paper including administrative costs, substantive compliance costs and delay costs;
  • any other opportunity costs and competition impacts that should be considered.

Better governance

Proposed measure:

Improve the operation of superannuation trustee boards by:

  • requiring a proportion of the board be independent directors;
  • ensuring ongoing effectiveness and performance through board renewal, turnover and appraisals of directors.


  • the appropriate definition of independence for directors;
  • the appropriate number of independent directors and whether the chair should be an independent director;
  • the process for appointing independent directors and whether the mechanism for appointment should be aligned for all board appointments;
  • measures to strengthen management of conflicts of interest;
  • whether directors should be subject to maximum tenure (and if so, the appropriate term) and regular performance appraisals.

Comments also sought on:

  • the most suitable regulatory mechanism for implementing governance changes;
  • the appropriate timeframe to implement governance changes; and
  • the types of transitional rules required with respect to existing directors on superannuation trustee boards.

Enhanced transparency – superannuation choice product dashboards


The requirements as to how a product dashboard for MySuper products is displayed are contained in Superannuation Legislation Amendment (MySuper Measures) Regulation 2013.  There are no regulations currently prescribing the detail of the requirements in relation to product dashboards for other superannuation ‘choice’ products and the issues are:

  • what should the choice product dashboard look like and should it be the same in content and format as the MySuper product dashboard;
  • the costs and benefits of adding a liquidity measure to the product dashboard. 



  • if the choice product dashboard is to present different information to the MySuper product dashboard, what should it include and why;
  • whether to allow trustees to set their own return target for choice investment products given not all products are benchmarked against the consumer price index;
  • the inclusion of a net investment return measure (excluding administration costs)  additional to the net return;
  • the inclusion of a risk measure capturing longer term inflation risk additional to the short term volatility risk measure;
  • suggested carve outs from the choice product dashboard obligations such as information on investment options such as legacy products where a product dashboard requirement would place unnecessary burden on the trustee with little or no benefit to members;
  • a suitable measure of liquidity if one should be included.

Proposed measure:

Delay the commencement date for the choice product dashboard beyond 1 July 2014.


  • whether the commencement date should be delayed;
  • an appropriate commencement date; and
  • any benefits or costs associated with delaying the commencement date.

Enhancing transparency – portfolio holdings disclosures


The Corporations Act 2001 requires superannuation fund trustees to provide portfolio holdings disclosures on a look through basis from 1 July 2014.  This would require disclosure of information sufficient to identify each of the investments acquired with superannuation fund assets, including assets or financial products held by managed investment schemes or through chains of investments. 


The Treasury consulted on draft portfolio holdings regulations in early 2013 and received submissions raising various concerns in relation to requirements to disclose in-confidence material and the degree of look through involved.  Alternative models suggested included:

  • requiring superannuation fund trustees to disclose direct fund holdings only and require the responsible entity of a collective investment vehicle to disclose their asset holdings separately;
  • a partial look through approach based on APRA reporting requirements and any units held by the trustee in a managed investment scheme operated by an unrelated entity would be disclosed.


  • the appropriate model of portfolio holdings disclosure to best achieve an appropriate balance between improved transparency and compliance costs including: 
    • whether a full look through approach should be taken;
    • whether the responsible entity of a collective investment vehicle should be required to disclose their assets separately;
  • the compliance costs associated with the suggested models of portfolio holdings disclosure; and
  • whether portfolio holdings information should be presented at an entity or investment option level.


The introduction of a materiality threshold setting the level of disclosure required by trustees to address concerns around disclosure of sensitive information such as requiring trustees to disclose at least 95 per cent of portfolio holdings to allow selective disclosure where ASIC already has discretionary powers to grant relief from portfolio holdings disclosure obligations imposed on trustees under section 1017BB of the Corporations Act.


  • the appropriateness of including a materiality threshold;
  • the impact of a materiality threshold on systemic transparency in superannuation fund asset allocation; and
  • the most appropriate way to implement such a threshold.

Proposed measure:

Delay the commencement date for portfolio holdings disclosure beyond 1 July 2014.


  • whether the commencement date should be delayed;
  • an appropriate commencement date; and
  • any benefits or costs associated with delaying the commencement date.

Enhancing competition in the default superannuation market


Reform the process for the selection and ongoing assessment of default products in model awards to ensure transparency and remove any potential conflict of interest.

The Productivity Commission conducted an inquiry in 2012 and the key aspects of its recommendations included, without limitation:

  • the selection of default products for awards should be merit rather than precedent based;.
  • the criteria APRA use for MySuper product authorisation should provide a first filter product selection and a second stage ‘quality filter’ to be based on non-prescriptive factors;
  • superannuation funds should be given standing to apply to, and be directly heard by, the panel, to have their products assessed for listing in modern awards
  • no express limit should be placed on the number of products that may be listed in a modern award; and
  • the process should be reviewed in 2023 and consider the appropriateness of allowing employers to select any MySuper product as a default superannuation product.

In response to the Productivity Commission’s report, the former Labor Government amended the Fair Work Act 2009 to enact a model commencing on 1 January 2014 that requires:

  • a two stage process conducted by the Fair Work Commission (FWC) to select default funds;
  • in the first stage, an expert panel is to assess applications from superannuation funds and put together a default list; and
  • in the second stage up to 15 default funds may be listed and superannuation funds are not entitled to appear before the Full Bench of the FWC.


  • the existing model commencing 1 January 2014 and whether it meets the objects for a fully transparent and contestable default superannuation fund system for awards;
  • the Productivity Commission’s model to improve default superannuation arrangements;
  • the organisation that should assess superannuation funds using a ‘quality filter’ under the Productivity Commission’s model;
  • a suitable model for allowing employers to choose the fund offering a MySuper product;
  • the publication of an advisory list of high quality funds; and
  • the treatment of corporate funds where changes are to be made to the selection and assessment of default superannuation funds.



The closing date for submissions on the discussion paper is Wednesday, 12 February 2014.

Following receipt of submissions, the Government proposes further consultation on any exposure draft legislation and regulations which are developed following consultation on the discussion paper.


We are available to provide you with further information or guidance about the issues raised in the discussion paper.

Please contact a member of the team on the right.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Michael Chaaya

Partner. Sydney
+61 2 9210 6627


Joanne Dwyer

Special Counsel. Brisbane
+61 7 3228 9375


Christine Maher

Consultant. Brisbane
+61 7 3228 9413