Treasury has released for public consultation an exposure draft of proposed amendments to repeal the member protection standards within the Superannuation Industry (Supervision) Regulations 1994. It is expected that this measure will have effect from 1 July 2013. This change comes as part of the Government’s response to the Super System Review which includes the introduction of a low cost default superannuation product called MySuper that restricts excessive fees.
The Super System Review was critical of the existing member protection standards. The restrictions on fees mean that members with large balances are having to subsidise the costs of low balance members. This is considered to discourage further investment. Further, the protection given to members with small account balances has created a disincentive for these members to consolidate their accounts.
The Government generally accepted these recommendations from the Super System Review, resulting in the proposed repeal of the member protection standards and the introduction of the MySuper reforms to protect members who may have otherwise benefited from the member protection standards.
MySuper, a low cost default superannuation product, can be offered by superannuation funds from 1 July 2013. MySuper focuses the trustee’s obligations on net returns which is expected to keep fees reasonable.
MySuper will still allow funds to charge fees on small account balances with respect to their interest, but ensures restrictions on unnecessary or excessive fees. This includes a ban on commissions in relation to retail investments, new standards for the payment of performance fees to fund managers, a ban on entry fees and exit fees being limited to cost recovery. MySuper will also encourage individuals to consolidate any small accounts they might hold.
The exposure draft makes amendments to the Superannuation Industry (Supervision) Regulations 1994 repealing the following regulations:
It is important to note that the repeal of the members protection standards and the introduction of MySuper is expected to occur on 1 July 2013.
The closing date for submissions as part of the public consultation for the draft amendments is Wednesday 13 February 2013.
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