The Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan, today announced a package of reforms designed to strengthen the prudential regulation of superannuation.
"These reforms will create a more modern, robust regulatory framework and enhance protection for the superannuation savings of all Australians," Senator Coonan said.
The reform proposals follow from the Government's 2 October 2001 Issues Paper, Options for Improving the Safety of Superannuation.
The Superannuation Working Group (SWG), chaired by Mr Don Mercer, and comprising representatives from the Australian Prudential Regulation Authority (APRA), Treasury and the Australian Securities and Investments Commission (ASIC), undertook industry consultation on the proposals and made recommendations for change.
The SWG found that the current prudential regime, which has remained largely intact since the Superannuation Industry (Supervision) Act 1993 was introduced almost a decade ago, is generally sound.
But the SWG recommended changes to modernise the regime and enable APRA to undertake preventative action rather than enforcement action after a breach has occurred.
In response to the SWG's report, the Government will introduce a number of reforms including:
Universal Licensing
- a requirement for all trustees of APRA-regulated superannuation funds to obtain a superannuation trustee licence (STL), and for all superannuation funds to be registered with APRA prior to accepting contributions;
Risk Management
- a requirement for trustees to prepare and submit to APRA a risk management plan for each fund, outlining how relevant risks will be managed and monitored, including a fraud control plan;
Enhanced Disclosure
- enhanced disclosure of important fund information to fund members, APRA, and publicly through ASIC's electronic facilities; and
Enhanced Enforcement
- appropriate enforcement powers to underpin the new framework.
"The package I am announcing today will maintain the integrity of the current prudential framework", Senator Coonan said.
"These reforms will improve fund governance and trustee competence, give APRA powers that support more proactive and preventative action, and improve disclosure of information, particularly to fund members.
"Many Australians have complained that they believe important information relevant to the operation of their fund is either disclosed to them too late or not at all.
"The Government wants members to have an opportunity to be more active in their fund through greater disclosure.
"Superannuation is the only regime regulated by APRA in which it is not necessary to obtain a licence to operate. This must change. It should not be possible to establish a fund and start managing other peoples' money without demonstrating the necessary skills or competence to do so.
"Prudential licensing for all trustees will ensure they demonstrate their competence to operate a fund before they open their doors.
Senator Coonan said for many Australians superannuation savings is their second largest asset after the family home, and will significantly improve their quality of life in retirement.
"This is why the safety of superannuation is paramount, and why I am putting forward these important reforms," Senator Coonan said.
The Government is also releasing the final report of the Superannuation Working Group (SWG), which formed the basis for this reform package, as well as the Government's response to the SWG's report.
"I would like to take this opportunity to thank the members of the SWG and particularly the chair, Mr Don Mercer, for their efforts in addressing the issues of concern in this area," Senator Coonan said.
The Government's response to the SWG's report addresses not only the recommendations they raised, but also a number of recommendations of the Productivity Commission in its Review of the Superannuation Industry (Supervision) Act 1993 and Certain Other Superannuation Legislation.
The Minister noted that the Government decided not to implement the SWG's recommendation that APRA be provided with a power to make prudential standards.
The Government considers that the other reforms, including the implementation of a trustee licensing regime, and requirements for all funds to have a risk management plan, together with the existing operating standards-making power, will ensure that trustees continue to remain responsible for fund governance, and that the regulator has appropriate tools to act where necessary.
The Government has agreed that the costs incurred by APRA in the licensing process will be met by a licence fee.