Many important high-level changes are going to be made on the superannuation chess board in 2024, and with a federal election looking increasingly unlikely later this year, they will probably make a lot of progress, shifting the focus and operation of the system even while the details are being sorted.
These changes are intended to improve people’s engagement with superannuation. Many other changes to super were made too often, were complicated and confusing, and led to increased disengagement. Let’s hope these changes are the exception to that rule!
The issues of the objective of superannuation, changes to the retirement phase, the rules around giving financial advice, improvements to member servicing, and communications with super fund members are all closely connected and a change in one will result in a change in the others.
Of course, the prize for the funds best able to meet their member’s best interest is survival and growth. Funds are being held to a higher standard than ever before. With these changes, the bar is going to be especially raised in relation to members at and approaching retirement.
Big changes will have to be made to the back, middle, and front offices of funds and their service providers. While it will take most of this year and beyond for these changes to work through the legislative process, many funds have already started work to respond to anticipated changes, not least because it’s in their DNA to continually improve outcomes for members.
So, what’s superannuation for?
That’s even the case with the Government’s proposal to legislate the Objective of Superannuation as ‘to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.’ While that might seem pretty high-level and divorced from the day-to-day running of the super system, it’s actually packed with important meaning.
For example, it says that the focus needs to be on delivering income in retirement and so retirement products need to be improved and developed to do just that; it also means that funds have to help manage financial risk in retirement, so education, advice, and support services that do this have to deliver. Many funds are using this as a high-level template for their own change programs.
Legislation on the Objective is before Parliament and is likely to be debated in the second quarter of 2024.
Cracking the financial advice nut
Also on the legislative radar for this year is a comprehensive financial advice reform package, reflecting the Government’s commitment to reduce red tape and make advice more accessible and affordable.
Under new rules for banks, insurers, and super funds, they will provide more advice on simple matters, replace Statements of Advice with a simpler record of advice, and employ a new class of qualified financial advisers who can provide advice on simple topics while being subject to the modernised best interests duty.
Many funds and platform providers are building new and innovative business models that leverage off the new rules, to provide better services for members and give themselves an improved point of difference.
Better help for older members
Transition to retirement and the retirement phase often hasn’t had the priority it needs. That’s changing as more members approach retirement with more money in super. The regulatory settings are changing to reflect this, and funds have to do more to show they know about these members and their needs and have the right products and services to meet them.
On the back of the newish requirement for funds to have a retirement income strategy, the Government is looking to see what they can do to encourage funds to do more in this space, including possible mandating of products or establishing a national mortality pool. It’s unlikely this will translate into legislation this year, but many funds are taking the challenge very seriously. We can expect to see plenty of innovation during the year, with members being the beneficiaries.
But wait, there’s more…
All of this very significant change is happening while there is already a big slate of other changes underway:
- Member service standards – Government announcement that regulators will take additional steps to lift standards
- Changes to non-arms-length income and expenditure rules – retrospective application from 1 July 2018: Bill now in Parliament
- New remuneration disclosure rules (CPS 511) –1 January 2024 implementation
- New resolution planning requirements (CPS900) – 1 January 2024 implementation
- New ways to make statutory declarations – 1 January 2024 (digital later in 2024)
- Implementation of new financial reporting and audit rules for super funds – generally 30 September 2024
- Financial Accountability Regime – 15 March 2025 implementation for super funds
- New earning tax for people with more than $3 million in superannuation – implementation from 1 July 2025
- Payday Super – 1 July 2026 implementation
- Review of super fund product performance assessment
- New and reviewed cyber-security legislation, including for critical infrastructure
- Ongoing changes to APRA data reporting
- Ongoing APRA review of the sustainability of group life insurance in super.
- Increased prosecution activity by ASIC
- Requirement for improved super fund approaches to cyber-frauds and scams
We look forward to going on the journey of superannuation change with you. After all, if there is anything that’s a constant in superannuation, it’s change!
 Superannuation joke.
By David Haynes – Head of Industry Insights