Superannuation (prudential standard) determination No. 9 of 2012
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Superannuation Industry (Supervision) Act 1993, section 34C(1)
Under subsection 34C(1) of the Superannuation Industry (Supervision) Act 1993 (the Act), APRA has the power to determine standards (prudential standards), in writing, in relation to prudential matters to be complied with by all RSE licensees of registrable superannuation entities (RSEs). Section 29X of the Act states that a prudential standard determined under section 34C may deal with matters relating to accrued default amounts.
On 11 December 2012, APRA made Superannuation (prudential standard) determination No. 9 of 2012 (the instrument) under subsection 34C(1) of the Act.
The instrument commences on 1 January 2013.
- Background
The Government indicated, in its response to the recommendations of the Super System Review in December 2010, support for the recommendation that APRA be given the power to make prudential standards in respect of superannuation, consistent with APRA’s existing powers in respect of banking and insurance.[1]
In May 2012, APRA released a package of documents for consultation on issues relating to authorisation of MySuper products, including a draft of Prudential Standard SPS 410 MySuper Transition (SPS 410).
APRA was granted the ability to make prudential standards in relation to superannuation under the Act by the passage of the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 on 8 September 2012.
2. Purpose and operation of the instrument
The purpose of the instrument is to make SPS 410, which sets out minimum processes for RSE licensees in relation to the election under sections 29SAA and 387 of the Act to attribute all accrued default amounts to a suitable MySuper product before 1 July 2017. The objective of SPS 410 is to ensure that all accrued default amounts within an RSE licensee’s business operations are placed within a suitable MySuper product or a choice investment option identified by the member before the end of the transition period, and that the process is managed soundly and prudently in the best interests of the members.
The key requirements of SPS 410 are that an RSE licensee must:
- identify members in each registrable superannuation entity with an accrued default amount and the amount of those balances;
- prepare and implement a transition plan addressing the movement of accrued default amounts to a suitable MySuper product; and
- undertake specified reporting to APRA.
3. Consultation
In May 2012, APRA released for public consultation a discussion paper, MySuper authorisation and transition standard, which outlined proposals for the authorisation of MySuper products and provided a draft of SPS 410. APRA received 8 written submissions in response to this discussion paper, presented the reforms via a wide range of industry forums and held discussions with a variety of industry participants.
APRA released a Response to Submissions – MySuper authorisation and transition standard (the response paper) and a package comprising the proposed final draft application form and SPS 410 on 3 October 2012. In the response paper, APRA outlined the significant issues raised in the submissions and APRA’s response to them. APRA stated that it did not intend to make any further changes to these documents except for those required to reflect any changes to the legislation as passed by Parliament.
4. Regulation Impact Statement
A Regulation Impact Statement is not required for SPS 410.
5. Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
The legislative instrument the subject of this explanatory statement does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Accordingly, in APRA’s assessment, this legislative instrument is compatible with human rights.
[1] Stronger Super, Recommendation 10.2, p. 60.
Overview
The Superannuation (prudential standard) determination No. 9 of 2012 was enacted to address the need for clear, prudential standards in the management of accrued default amounts within registrable superannuation entities (RSEs) under the Superannuation Industry (Supervision) Act 1993. This Act, passed by the Australian Parliament, provides the Australian Prudential Regulation Authority (APRA) with the authority to set prudential standards, empowering APRA to safeguard the interests of superannuation members. The policy objective of this determination is to ensure that all accrued default amounts are prudently transferred to suitable MySuper products before the end of the transition period on 1 July 2017, thereby protecting the interests of members and maintaining the stability of the superannuation system. The instrument came into effect on 1 January 2013, following extensive consultation with industry participants and the release of a discussion paper and a response to submissions by APRA.
Scope and Application
Superannuation (prudential standard) determination No. 9 of 2012 applies to all Responsible Superannuation Entity (RSE) licensees of registrable superannuation entities (RSEs) as defined under the Superannuation Industry (Supervision) Act 1993. These entities are primarily responsible for the administration and compliance of superannuation funds. The Act grants the Australian Prudential Regulation Authority (APRA) the authority to establish prudential standards to ensure the financial soundness and stability of the superannuation industry. This particular instrument, which commenced on 1 January 2013, was made under the authority conferred by section 34C(1) of the Act, and it specifically deals with matters relating to accrued default amounts. The determination requires RSE licensees to implement processes for attributing all accrued default amounts to suitable MySuper products before the end of the specified transition period, which is before 1 July 2017, to ensure that these amounts are managed prudently and in the best interests of the members. The instrument does not specify any exclusions or exemptions but does rely on subordinate instruments for detailed implementation and compliance processes.
Key Provisions
The Superannuation (prudential standard) determination No. 9 of 2012 (the instrument) sets out the prudential standard SPS 410, which governs the transition of accrued default amounts in superannuation entities to MySuper products (section 2). This standard is crucial for ensuring that these amounts are appropriately managed and moved into suitable MySuper products before the transition period ends on 1 July 2017. The determination outlines the specific requirements that must be met by Responsible Superannuation Entity (RSE) licensees, including identifying members with accrued default amounts, preparing a transition plan, and reporting to the Australian Prudential Regulation Authority (APRA).
RSE licensees are required to undertake several specific actions under this standard. Firstly, they must identify members who have accrued default amounts in their superannuation accounts and determine the exact amount of these balances (section 2). Secondly, they are required to prepare a detailed transition plan that addresses how these accrued default amounts will be moved into a suitable MySuper product (section 2). This plan must be implemented effectively to ensure that the transition is managed soundly and prudently, in the best interests of the members. Finally, RSE licensees must report on their progress and activities related to this transition to APRA, ensuring transparency and accountability (section 2).
Failure to comply with the requirements of SPS 410 can result in significant consequences for RSE licensees. Although specific offences and penalties are not detailed in the instrument, non-compliance with prudential standards generally can lead to enforcement actions by APRA. These actions may include fines, public reprimands, or in severe cases, the revocation of the RSE licensee's authorisation. Additionally, members whose accrued default amounts are not transitioned correctly may face financial disadvantages, impacting their retirement outcomes.
In summary, the Superannuation (prudential standard) determination No. 9 of 2012 is a critical legislative instrument that mandates specific actions for RSE licensees to manage the transition of accrued default amounts into MySuper products. Compliance with these standards is essential to protect members' retirement savings and ensure the sound management of superannuation funds. Non-compliance can result in regulatory action and potentially harm members' financial futures.