The Government will make changes to its proposed superannuation governance bill, following from the consultation process, the Assistant Treasurer Josh Frydenberg announced.
“The Government is committed to delivering the best possible outcomes for Australians saving for their retirement,” said Mr Frydenberg.
In June the Government released an exposure draft of legislation, the Superannuation Legislation Amendment (Governance) Bill 2015: Governance arrangements for APRA regulated superannuation funds, to change aspects of super fund governance, including requiring at least one-third independent directors and an independent chair for public-offer super funds. Mr Frydenberg says this is “consistent with both the 2010 Cooper Review and the Financial System Inquiry.”
The Financial System Inquiry final report, to which the Government has yet to respond, recommended at least a majority of independent directors.
Following from the consultation process the Government has decided to make several changes to the draft legislation, before submitting it to Parliament. The changes include more detail on the definition of ‘independent’, super funds will have a full three year transition period and “greater flexibility” during the transition period where an “APRA compliant transition plan” is in place.
The changes will also clarify “that the Bill overrides both governing rules and the constitution of a corporate trustee.”
Mr Frydenberg said the explanatory materials to the bill would also be changed, to provide guidance on how super funds can fulfil the ‘if not, why not’ reporting requirement on a majority of independent directors.
“These amendments will provide greater clarity and certainty and further the Government’s commitment to protecting the retirement savings of all Australians,” said Mr Frydenberg.
Submissions on the proposed changes closed on the 23rd of July, however Treasury has yet to release the submissions. If recent consultations are any guide there will likely be a significant delay before they are published.
Legal analysis questions need for super fund governance changes
The need for the super fund governance changes has been questioned by Industry Super Australia.
“New legal analysis indicates the Federal Government’s proposals to change governance rules for not-for-profit superannuation boards are unnecessary because the regulator APRA already has the powers it needs,” said an Industry Super Australia (ISA) statement.
According to ISA the legal analysis it obtained concludes that “it is difficult to identify existing gaps or areas where APRA does not already have significant powers to step in if it identifies an area of concern.”
“The new laws will hand excessive new powers to APRA to interpret and police poorly defined areas of law, abandoning the conventional role of elected government,” said ISA.
“This legal advice raises doubt about the rationale behind the government’s proposed changes and reinforces the view that the changes are a solution in search of a problem,” said Industry Super Australia Chief Executive David Whiteley.
“The question is what problem is the government trying to fix?”
“The Government is imposing an estimated red tape bill of $178 million on not-for-profit super funds which will be borne by members. At the same time, no action is being taken to address the identified problems within the banks wealth management divisions,” said Mr Whiteley.
FSC welcomes clarification on governance changes
The Financial Services Council (FSC) welcomed the changes to the draft bill, as it had when the governance change were originally announced.
“The rising tide of governance will lift standards for all super funds – retail, industry, public sector and corporate. The changes do not single out any one fund type, but are actually designed to improve governance across the $1.4 trillion APRA-regulated sector,” said FSC CEO Sally Loane.
“In a mandatory super system, consumers are entitled to the highest standards of governance,” she said.
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