Welcome to Issue 50 of the FSC Policy Update. In 2021, this member briefing on the main legislative and regulatory changes across the financial services industry will be issued monthly.
Parliament has entered an extended break before the release of the Federal Budget, which will be handed down on Tuesday 11 May.
The Budget will be an important document for the Government as it could be the last Budget before the Government goes to the polls, potentially as early as the second half of 2021. The Budget will also respond to the impact on the economy of the end of Job Keeper, and the Government has indicated it will lay out its position on increasing the Super Guarantee to 12 per cent.
The Your Future, Your Super Bill is before a Senate Committee, however the crucial regulations have yet to be released and scrutinised. The FSC has made a submission on the Bill, and we are scheduled to give further in-person evidence.
The FSC has also recently been in Canberra engaging with members and financial advice associations on the ongoing review of the Life Insurance Remuneration Framework. This work remains ongoing, with a focus on putting the LIF review into the broader context of the life insurance / advice ecosystem.
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Blake Briggs, FSC Deputy CEO
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Click on the topic of interest below to read more
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2 weeks to go - Life Insurance Summit and Industry Awards
Legacy contracts under the Unfair Contract Terms (UCT) regime
Parliamentary Inquiry on Mental Health and Suicide Prevention
Design and Distribution Obligations (DDO) update
APRA Superannuation Data Transformation
Senate Economics Committee review of Your Future, Your Super legislation
ASIC publishes review of superannuation funds during COVID-19
Two in three consumers back reform of financial advice with less paperwork to reduce cost
Advice fee consent and independence disclosure Legislative Instruments released
FSC Performance Analytics Group – GIPS 2020 Survey
Competition in Funds Management Interim Report
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LIFE INSURANCE
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2 weeks to go - Life Insurance Summit and Industry Awards
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As we get closer to this year's Life Insurance Summit, we are pleased to announce more sector specialists who will be speaking at the event on Wednesday 21 April:
- Helen Rowell, Deputy Chairman, APRA
- Phil Anderson, Acting CEO, AFA
- Michael Vrisakis, Partner, Herbert Smith Freehills
- Mark Stewart, Managing Director - Australia and New Zealand, RGA
- John Berrill, Principal, Berrill & Watson
- Dion Russell, CEO, SCOR
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Finalists have now been announced for the annual Life Insurance Industry Awards. Find out more here.
Don't miss out on attending this premier industry event! In person tickets are selling fast.
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DATE: Wednesday 21 April 2021
TIME: Summit: 8.30am - 5.30pm / Cocktail Drinks: 5.30pm - 6.30pm / Awards Dinner: 6.30pm - 10.00pm
VENUE: The Hilton, 488 George St, Sydney / Online
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Legacy contracts under the Unfair Contract Terms (UCT) regime
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The FSC has written to ASIC and APRA to flag strong concerns from industry around the treatment of legacy contracts ahead of the commencement of the UCT regime. The FSC understands the key issue is that if there are certain changes made to these legacy products after 5 April 2021, these will be deemed new contracts, thereby bringing all the terms of that contract within the scope of the UCT regime. Examples of these changes include reinstating a policy that has lapsed, transferring the ownership of a policy in and out of superannuation and conversions between stepped and level premiums.
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Please contact Nick Kirwan for more information.
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Parliamentary Inquiry on Mental Health and Suicide Prevention
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The FSC has made a submission to the House of Representatives Select Committee on Mental Health and Suicide Prevention inquiry. Although the terms of reference do not mention life insurance explicitly, the inquiry is based on the findings of the Productivity Commission Inquiry Report into Mental Health. As such, the aim of the submission is to provide the Committee with an overview of the life insurance industry’s interest in mental health and the actions the industry is taking to improve mental health outcomes where they’re encountered.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Work on Life Code 2.0 continues at a pace with the FSC conducting informal consultation with key stakeholders. The working group continues to address the feedback that has been raised as a result of the plain English drafting process. Following this process, a full public consultation will be undertaken.
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Please contact Jamie This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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PARLIAMENT, LEGISLATION AND REGULATION
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Design and Distribution Obligations (DDO) update
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FSC members met with ASIC to discuss the FSC’s template Target Market Determinations (TMDs) for funds management, and are making revisions to the template to reflect the outcomes of that discussion.
FSC members met with ASIC to discuss a wide range of issues relating to the DDO regime as it applies to superannuation, platforms and funds management. A summary of the outcomes was circulated to members of the FSC working groups for information and comment. As a follow up, the FSC has asked ASIC for further information/discussions about a number of outstanding or unresolved issues.
Development continues on the FSC’s template TMDs for funds management (including Exchange Traded Funds), superannuation, platforms, IDPSs, and life insurance products. The latest versions are being circulated to the relevant DDO working groups and are available on the FSC website here.
The FSC also continues to develop data standards relating to the DDO. The standards are available here.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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ASIC has informed the FSC that it is working towards releasing a draft Regulatory Guide on remediation in June 2021, which will incorporate feedback on submissions on ASIC’s CP 335 on remediation.
In response to a request from ASIC, the FSC is requesting members provide more feedback/data on the existing low value threshold for remediation of $20. The requested data includes the extent of remediation that interacted with the threshold, and the benefits to businesses and customers of the threshold. Separately, the Treasury is requesting FSC members provide information about the impact of lost member accounts on remediation programs.
These information requests are being progressed through the FSC remediation Working Group.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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SUPERANNUATION
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APRA Superannuation Data Transformation
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APRA has released final data standards and implementation information for Phase 1 of the Superannuation Data Transformation.
This includes new reporting standards covering:
- Insurance
- Expenses
- Asset Allocation
- RSE Structure and Profile
- Member accounts
- Components of net return
- Investment performance and objectives
- Fees and costs
APRA has also issued a response paper which outlines the response to industry feedback and changes that have been made to the draft data standards.
To assist with the transition to these new arrangements, APRA has introduced a staged approach to commencement, with some reporting being deferred and a temporary materiality threshold being applied to expense reporting.
APRA has acknowledged industry concerns about publication of commercially sensitive data under the regime. Further consultation is expected later this year on confidentiality of data collected under the new reporting standards.
APRA has also commenced a pilot process using the new APRA Connect data collection solution, which involves a small number of funds. It is expected the APRA Connect test environment will be available to all users from June 2021.
The FSC will continue to work with members and APRA to address implementation issues relating to the new data collections.
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Senate Economics Committee review of Your Future, Your Super legislation
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The FSC has made a submission to the Senate Economics Committee in relation to the Treasury Laws Amendment (Your Future, Your Super) Bill 2021. The submission echoes many of the issues raised in our earlier submission on the draft legislation, and reinforces concerns about the implementation timeframe for these reforms, particularly in the absence of regulations.
The FSC will also appear at a public hearing on Wednesday 7 April to discuss the Bill.
The Committee is scheduled to report on 22 April.
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ASIC publishes review of superannuation funds during COVID-19
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On 22 March, ASIC published a review of how superannuation trustees supported their members through COVID-19.
This article highlights issues relating to website communications and provision of intra-fund advice.
ASIC noted that trustees were generally quick to resolve any issues raised by ASIC in relation to COVID-19 communication tools.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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ADVICE
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Two in three consumers back reform of financial advice with less paperwork to reduce cost
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This week the FSC released research showing 64 per cent or almost two in three Australians support simpler financial advice, reduced paperwork and complexity and reduced cost. The insights were covered in a story by Aleks Vickovich, Wealth Editor at the Australian Financial Review: ‘Consumers endorse red tape rollback for financial advice’
- The FSC last year commissioned research agency, Pollinate, to conduct consumer testing which shows consumers believe reducing documentation to provide cheaper advice will not only encourage them to seek advice but that this will have positive impact for everyday consumers.
- While 26 per cent of consumers have sought advice 42 per cent of consumers are open to it but feel they can’t get it. Those considering seeking financial advice are more likely to be females aged under 35, living in metropolitan areas in full time work or studying while working.
- Between 59 and 72 per cent of consumers who had received advice in just the past 12 months, during COVID-19, agreed or strongly agreed it helped them achieve financial confidence, improved their peace of mind or had improved their overall life situation.
- 18 per cent of Australians are likely to seek financial advice in the next 12 months.
The FSC’s Green Paper on financial advice will be released in coming weeks with solutions for public discussion on improving the accessibility and affordability of financial advice, reducing cost and complexity.
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Advice fee consent and independence disclosure Legislative Instruments released
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ASIC has released finalised versions of the following Legislative Instruments (LI):
- Consent to pass on costs of providing advice;
- Consent to deductions – ongoing fee arrangements;
- Disclosure of lack of independence.
ASIC is empowered to make these instruments under legislation recently passed by the Federal Parliament implementing several Financial Services Royal Commission recommendations. ASIC has also issued the following support materials to support compliance with the Legislative Instruments:
- Example written consent form (ongoing fees) (PDF 137 KB)
- Example written consent form (non-ongoing fees) (PDF 88 KB)
- Frequently asked questions – Advice fee consent and independence disclosure
Identifying practical issues with the LIs ahead of the date of compliance by 1 July will be handled by the Super and Advice Working Group. The FSC is scoping potential work other industry bodies on developing an industry standard form.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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INVESTMENTS
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FSC Performance Analytics Group – GIPS 2020 Survey
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The FSC Performance Analytics group would appreciate member involvement in a survey about the GIPS 2020 standards to help us understand their use by the industry.
This includes understanding why entities may or may not use the GIPS 2020 standards. The survey should take around 5 minutes to complete. See here.
The survey can be completed by all entities - those who use the GIPS2020 standards and those who do not. The FSC team would be grateful if the survey could be completed by Wednesday 7 April.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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Competition in Funds Management Interim Report
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Deloitte has released the Competition in Funds Management Interim Report which is open to consultation until 9 April. The FSC is preparing a submission with members providing feedback.
A key finding of the interim report is that we have a competitive funds management industry, is demonstrated by low fees on a global basis, innovation and new entrants into the market.
However the report also notes there is no single source of truth that allows for direct comparison between funds.
Given that ASIC is intending to commence a recurrent managed fund data project, this may soon change. ASIC will have a single source of truth once it collects retail, wholesale fund data including information on unregistered managed investment schemes. It may well be that ASIC would seek to use the data collected to assist consumer understanding of managed funds.
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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TAX
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- The Government announced the Offshore Banking Unit (OBU) regime would be ended with a two year transition period for existing users of the OBU regime. The OBU regime is used by a number of fund managers to obtain lower, more globally competitive, tax rates on activity that is likely to move offshore without the regime.
- The Government announced with the closing of the OBU regime that it would consult with industry on ways to “ensure that Australia remains globally competitive and an attractive market for financial services”.
- In response to this Government announcement, the FSC is continuing existing work on proposals to make Australia competitive, including:
- Introducing a number of withholding tax exemptions for funds management
- Introducing the Corporate Collective Investment Vehicle (CCIV) with competitive tax arrangements
- Addressing issues with foreign exchange hedging under the TOFA rules
- Addressing outstanding issues with the Investment Manager Regime (IMR)
- Prioritise tax treaties with Luxembourg and Hong Kong
- The FSC is working with the Australian Custodial Services Association (ACSA) and the Association of Superannuation Funds of Australia (ASFA) on an industry response to ATO proposals relating to tax governance relating to the use of third party data.
- The FSC is reviewing the proposed revisions to the ATO’s draft guidance on fund member tax statements (AMMA/SDS).
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Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for more information.
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