In December 2011, the Australian Securities and Investments Commission released:
The Guide also sets out ASIC's position on superannuation benefit calculators which allow members to predict their retirement benefits and how those benefits are affected if the member changes variables.
Although ASIC has made it easier for trustees to provide members with forecasts of their retirement benefits, trustees should take extra care to ensure that all ASIC's requirements are met.Jeff Holowaychuk
ASIC has released a new Class Order and a Regulatory Guide to encourage superannuation trustees to offer forecasts and calculators to members.
ASIC is hoping that super fund trustees will provide their members with more information (in a way which does not mislead members) so as to help members engage more actively with their superannuation.
The relevance of this article is limited to trustees, advisors and members of public superannuation funds. It may also be relevant to SMSF trustees who issue annual statements to their members, though these trustees will be in the minority as member statements are not a legal requirement of running an SMSF.
In short, the Class Orders allow super fund trustees to provide their members with superannuation forecasts and superannuation end benefit calculators even if the trustees do not hold an Australian Financial Services Licence (AFS Licence) with a specific 'advice' authorisation. Also if the super fund trustee already holds such an AFS Licence, then ASIC's Class Orders provide relief from the application of the advice, conduct and disclosure requirements of the AFS Licence.
The Class Orders require that the forecasts and calculators assume variables and standard information to ensure that super fund members may have confidence in the design of superannuation forecasts and the quality of the assumptions made.
ASIC also encourages super trustees to present superannuation forecasts and standard information in a way that will best suit the particular needs of their members.
Before trustees provide superannuation forecasts and calculators for their members, they should carefully consider the Class Orders to make sure they meet the specific requirements for relief — a breach may involve considerable penalties.
The Class Orders are:
ASIC's Guide 229 is a guide for super fund trustees, and their advisors, about how trustees can provide retirement benefit forecasts to members.
A superannuation forecast is an estimate provided (usually by the fund's trustee) to a super fund member of the balance of their superannuation investment at retirement. This forecast must take into account specified variables, including:
If a super fund trustee wishes to provide its members with a superannuation forecast, then ASIC requires that the forecast:
ASIC's objective in requiring these standardised assumptions:
For the purposes of Class Order 05/1122 and the Guide, ASIC regards any of the following as a superannuation financial calculator: any facility, device, table or other thing used to make a numerical calculation. ASIC's view is that the variables members can add into the calculator must be reasonable.
The main difference between superannuation forecasts and superannuation calculators is that a calculator enables a member to control the variables that apply to their superannuation plans, such as contribution levels and retirement age.
The key point for super fund trustees to note is that the AFS Licence relief is available only to superannuation calculators that do not advertise or promote a specific financial product.
For questions or more information about the above article, please call Maddocks in Melbourne on 03 9288 0555 and ask for a member of the Superannuation Team.
You can read other articles concerning superannuation and SMSFs here.
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Andrew is a lawyer in the Maddocks Tax & Revenue team.
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His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Andrew was a tax consultant at a Big 4 Chartered Accounting Firm.
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