Fund Product, Company and Regulatory Updates as at 20 June 2019

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Product Updates

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Intrust Super launches micro-investing platform for members
Everyday purchases allows Intrust Super members to save more money or spare change by connecting their superannuation account and their bank accounts, transferring micro contributions to superannuation.

There are no new accounts required to set the system up, as the technology is integrated across a wide range of major administrative and banking platforms. The tool, SuperCents, removes the voluntary contribution form that had to be posted by snail mail to the fund, and offers members a range of options.

LUCRF Super updates insurance premiums
Life and total and permanent disability (TPD) insurance premiums at industry superannuation fund LUCRF Super are changing depending on a member’s age. Older members will be charged more, while younger members less. The changes come after the new Protecting Your Super legislative reforms. The changes include:

  • Death only cover will reduce and premiums rise for members aged over 50

  • Members have two options to keep current level of level premiums for life insurance after 1 July 2019 without answering any more health questions or having any further underwriting

  • First option is to transfer the current cover level to the closest available fixed premium death-only units equal to or above the current level of cover

  • The second option is to move to the equivalent ‘fixed amount death only’ cover under the new arrangements, which will increase premiums as members age while the sum insured stays the same

  • Members aged 29 and under can be insured for lower premiums

  • 30-33-year-olds will see a minor increase in premiums and a slightly lower level of cover

  • Those aged 34 and over will have higher levels of cover and a slight premium increase

  • Members aged 26 and under will have a far lower level of life cover and reduced premiums

  • Those aged 27-29 will see reduced premiums for slightly higher levels of life cover

  • Those aged 30+ will have higher levels of cover and a moderate increase in premiums

BetaShares and Legg Mason launches active ETF
A new active exchange-traded fund (ETF) investing in emerging markets equities has been launched by BetaShares and Legg Mason, the BetaShares Legg Mason Emerging Markets Fund (managed fund) (ASX: EMMG).

The portfolio has 47 holdings currently, including Samsung Electronics, Alibaba, Tencent and Ping An Insurance Group, with most allocations coming from China, South Korea, Taiwan and India. Most are in financials and information technology.

BUSSQ increasing admin fees
In line with the Protecting Your Super reforms, BUSSQ industry superannuation fund is to increase its administration fee by $0.75 from 1 July 2019, to $2.25 per week. The increase has almost doubled many members’ administration fees, from $1.50 per week, however the increase only applies to members who are actively contributing to an income account.

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Company Updates

Industry association closes its doors after almost a century
The Superannuated Commonwealth Officers of Australia was a recognised industry association as a coalition of state bodies to represent the interests of former public sector employees who were receiving a defined benefit pension as part of the now-closed Commonwealth Superannuation Scheme and Public Sector Superannuation scheme.

The association, set up in 1923, has more recently been advocating for changing the means by which the scheme pensions are fairly indexed so they match the cost of living index. In the 1980s the association had almost 50,000 members, however with most of its members having by now passed away, there are only 4,000 members remaining. Surplus funds are being distributed to four organisations that support older people.

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Regulatory Updates

APRA imposes licence conditions on AMP Super and board
AMP Superannuation and NM Superannuation Proprietary (AMP Super) have new licence conditions to comply with under the direction of the Australian Prudential Regulatory Authority (APRA). APRA identified several areas that need improvements, including breach remediation processes, the rectifying of poor risk culture, and improving accountability mechanisms.

AMP Super must also engage an external expert to report on remediation and compliance with the directions and licence conditions. AMP Super was identified during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, with this action stemming from the Royal Commission findings.

AMP said it will cooperate fully with APRA.

ASIC acts against SMSF advisers
In the first case of its kind, ASIC has commenced civil penalty proceedings against RM Capital and its authorised representatives, the SMSF Club, in relation to accepting conflicted remuneration. ASIC is alleging that the SMSF Club gave advice regarding its clients setting up self-managed superannuation funds (SMSFs) and then investing in property by a single real estate agent, Positive RealEstate.

SMSF Club is accused of having referral arrangements with the real estate agent, and that RM Capital was aware of this arrangement. ASIC says that each time an SMSF Club client bought a property via Positive RealEstate, the real estate agent paid around $5,000 to the SMSF Club.

Sometimes these fees were paid directly to the SMSF Club, while other times to RM Capital, who passed most of the money on to the SMSF Club. ASIC alleges that the SMSF Club accepted over $730,000 in conflicted remuneration from Positive RealEstate.

ASIC says that the payments could reasonably have been expected to influence financial product advice given by the SMSF Club to its clients, and was therefore considered banned or conflicted remuneration under the Corporations Act. ASIC alleges that RM Capital was aware of the payments but didn’t take reasonable steps to stop this practice, and thus RM Capital has also breached the law.

Whitebox Trading off the hook
The Federal Court of Australia found that a Whitebox Trading and its sole director and principal Johannes Boshoff did not engage in market manipulation in connection with orders placed on the ASX. Boshoff has been cleared of accusations that he failed in his duties as a director of Whitebox.

Whitebox is a National Australia Bank (NAB) contractor. In 2013, ASIC accepted an enforceable undertaking (EU) from NAB regarding its responsibility for the alleged market misconduct of Whitebox staff, and a share price spike in 2012.

Super and retirement calculators soon to include inflation
The Australian Securities and Investments Commission (ASIC) has updated generic calculator regulations so that estimates produced by superannuation and retirement calculators are adjusted for inflation. The new requirements start on 5 December 2019.

Calculator estimates must be adjusted for inflation using either the default inflation rate set out in the instrument for superannuation and retirement calculators, or an alternative inflation rate, so long as certain disclosure requirements are met.