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Attachment
Government Response to the Review into the Governance, Efficiency, Structure and Operation of Australia's Superannuation System

Chapter 4: Outcomes transparency

Recommendation 4.1

With an enhanced rule-making power, APRA, in consultation with ASIC and industry, should develop outcomes reporting standards as an overlay to the existing accounting standards AAS 25 and ED 179 to facilitate consistent and comparable reporting by large APRA funds of investment performance and costs at investment option level, including for MySuper products.

Government response

Support in principle

The Government will ask APRA to develop approaches to publishing investment performance data that would improve transparency, comparability and accountability in relation to fees, costs and investment returns, including for MySuper products. The Government will ask ASIC to develop standards for disclosure by trustees.

Recommendation 4.2

In addition to whole of fund reporting, APRA should publish investment return performance data for MySuper products.

Government response

Support

The Government will ask APRA to develop approaches to publishing investment performance data that would improve transparency, comparability and accountability in relation to fees, costs and investment returns, including for MySuper products. The Government will ask ASIC to develop standards for disclosure by trustees.

Recommendation 4.3

All funds should be required to publish on their websites an investment option performance table (as shown in table 4.1 in chapter 4) showing investment returns and costs at investment option level, in accordance with an outcomes reporting standard to be developed by APRA in consultation with ASIC and the industry.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.

Recommendation 4.4

APRA should be the sole public sector agency responsible for collecting data for all public purposes in respect of all APRA funds and EPSSSs. APRA should have the primary responsibility for the publication of all superannuation data in as disaggregated a form as is consistent with privacy principles.

Government response

Support

The Government supports this recommendation.

Recommendation 4.5

The ATO should continue to collect data in relation to SMSFs.

Government response

Support

The Government supports this recommendation.

Recommendation 4.6

It should be mandatory, when referring to past performance of a MySuper product or a choice investment option, to disclose a standardised measure of the uncertainty or volatility associated with the return (an example of which is shown in table 4.1 in chapter 4). This requirement, and the volatility measure to be used, should be in an outcomes reporting standard to be developed by APRA in consultation with ASIC and the industry.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.

Recommendation 4.7

All forms of cost and fee disclosure by superannuation funds should be on a pre-tax basis, i.e. gross of tax, in accordance with an outcomes reporting standard to be developed by APRA in consultation with ASIC and the industry.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues. APRA will be able to publish industry data which is transparent and comparable for fees, costs and investment returns.

Recommendation 4.8

An outcomes reporting standard should be developed by APRA, after consultation with ASIC and the industry, which would deal with how investment returns have to be calculated both gross and net of all costs (administration and investment) and taxes and then disclosed only in a format governed by the standard.

Government response

Support

The Government will ask APRA to publish industry data which is transparent and comparable for fees, costs and investment returns and ASIC to develop standards for disclosure by trustees.

Recommendation 4.9

In consultation with industry, government should finalise the details of an investment option performance table for MySuper products and choice investment options, building on the model proposed by the Panel. APRA should then specify this in an outcomes reporting standard. Specifically, the consultation would progress the development of a standardised disclosure format containing:

  1. gross investment returns, costs and investment returns net of all costs (administration and investment) and taxes for investment options for 1, 5, and 10-year periods; and
  2. the number of quarters of negative investment returns the investment option has incurred in the past 10 years, or a proxy figure developed using data published by APRA for those options with a history of less than 10 years.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.

Recommendation 4.10

Investment option performance table data would have to be maintained by trustees and be easily accessible on the fund's website for as long as the fund remains in existence.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.

Recommendation 4.11

Trustees of large APRA funds should disclose each diversified investment option's investment return target and risk target, as shown in table 4.2 of chapter 4 in a product 'dashboard'. A similar approach should be required for undiversified options, with the underlying asset class or classes being disclosed in place of the 'investment return target'.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.

Recommendation 4.12

In consultation with industry, APRA should develop an outcomes reporting standard dealing with all of the requirements for the product 'dashboard'. Specifically, the consultation should progress the development of a product 'dashboard' containing the:

  1. net investment return target (after-tax), which should be expressed as a percentage above CPI, over a rolling 10-year period;
  2. range of possible outcomes for a MySuper product or choice investment option (i.e. risk target) over a 10-year period in a visual, diagrammatic format;
  3. the projected liquidity of the MySuper product or investment option;
  4. projected Total Annual Expense Ratio (TAER) which would capture all the projected costs to at least the first non-associated entity level; and
  5. relative ranking of overall fees (as collected and published by APRA).

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.

Recommendation 4.13

As part of the development of an outcomes reporting standard, APRA, in consultation with the industry, would ensure trustees report costs to APRA on a consistent basis.

The standard would prescribe:

  1. cost categories and their composition;
  2. requirement for cost categories to be subject to an annual audit;
  3. 'cost categories' to be reported in the APRA annual return at the whole of fund and MySuper levels; and
  4. costs to be disclosed to at least the first non-associated entity level.

Government response

Support in principle

The Government will ask APRA to publish industry data which is transparent and comparable for fees, costs and investment returns and ASIC to develop standards for disclosure by trustees.

Recommendation 4.14

Trustees offering MySuper products should be required to participate in APRA-approved benchmarking surveys that would measure their relative efficiency against peers in a number of key areas (e.g. administration costs per member, service standards) in accordance with an outcomes reporting standard to be developed by APRA in consultation with ASIC and the industry. APRA should be required to publish the results of such benchmarking surveys.

Government response

Support

The Government will ask APRA to develop a process for collecting data which will allow the publication of appropriate information on the risks and investment returns of MySuper products.

Recommendation 4.15

APRA should have explicit powers to collect superannuation fund data on a 'look-through' basis so that it can achieve an understanding of the fund's asset allocation, risk, returns and costs.

Government response

Support

The Government will ensure that APRA has the power to collect superannuation fund data on a 'look-through' basis. This is essential to ensuring APRA can collect and publish comparable data on the long-term risk-categorised net returns of MySuper products.

Recommendation 4.16

Trustees of large APRA funds should be required to disclose their complete portfolio holdings on a six-monthly basis in accordance with an outcomes reporting standard to be developed by APRA in consultation with ASIC and the industry. This would require disclosure to APRA within 60 days after the end of each six month period, corresponding with normal financial years and half-years, and then public disclosure of the same information, on the fund's website, three months later.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on the costs and benefits of this recommendation.

Recommendation 4.17

Trustees of large APRA funds should maintain a website that provides, free of charge, systemic transparency about the fund and the fund's management.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on the costs and benefits of this recommendation.

Recommendation 4.18

Trustees should retain the last 10 years' worth of such information and make it available on the fund's website.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on the costs and benefits of this recommendation.

Recommendation 4.19

Trustees should be required to publish on the fund website the historical Total Annual Expense Ratio (TAER), which would capture the historical costs to at least the first non-associated entity level, for each MySuper product or choice investment option within the fund.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on the costs and benefits of this recommendation.

Recommendation 4.20

Government should task ASIC, in consultation with industry, other regulators and consumer groups, to establish a central website about superannuation to draw together features, including standard disclosure of legislative, tax and other super-related features, and to be a portal to other superannuation-related information. All large APRA funds would be required to link their websites to this site.

Government response

Support in principle

The Government supports improved disclosure requirements but will consult with relevant stakeholders on design and implementation issues.