The Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 was introduced in the House of Reps on Thursday 16.2.2012. It contains the 2nd tranche of legislation for the Government’s Stronger Super (MySuper and governance) reforms. While the Bill is largely unchanged from the draft legislation released on 12 December 2011, it has been revised in relation to the enhanced duties for MySuper trustees and conflicts of interests.
The Bill proposes to replace the existing trustee covenants in s 52 of the SIS Act with separate covenants for trustees of registrable superannuation entities (RSEs). The covenants will replicate the existing provisions but create new duties for trustees of RSEs to act fairly, give priority to the interests of beneficiaries and ensure that the interests of beneficiaries are not adversely affected by conflict of interests. The existing obligation in relation to the degree of care, skill and diligence required of trustees will be heightened to the standard of “a prudent superannuation trustee”. New personal duties will apply to directors of corporate trustees in their own right. While the existing covenants for trustees of SMSFs will be retained separately in new ss 52B and 52C, SMSF trustees will be required to review regularly the investment strategy and reserves.
Trustees authorized by APRA to offer a MySuper product will be subject to additional duties to promote the financial interests of MySuper members (in particular returns after deducting fees, costs and taxes), annually assess sufficiency of scale, and include the investment return target and level of risk in the investment strategy.
The current trustee capital requirements will be replaced with a new duty to formulate a risk management strategy and maintain financial resources to cover operational risk.
Date of Effect: The new duties for trustees will apply from 1 July 2013. The prudential standards powers for APRA will apply from the day after Royal Assent. APRA is expected to finalize its proposed standards by the end of 2012 with a transitional period until 1 July 2013.
[LTN 31, 16/2]
Bill referred to Parliamentary Committee by Shadow Assistant Treasurer
On a motion by Senator Cormann Wed 29.2.2012, the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012 has been referred to the Parliamentary Joint Committee on Corporations and Financial Services for report. The Bill, which is still before the House of Reps, proposes to amend the SIS Act to, among other things: (i) impose additional duties on MySuper trustees from 1 July 2013; (ii) replace the existing trustee covenants with separate covenants for trustees of registrable superannuation entities (RSEs) and self-managed superannuation funds (SMSFs); (iii) apply new personal duties for directors of corporate trustees.
[LTN 40, 29/2]