08-128 Less paper in super
Friday 20 June 2008
In recent months, ASIC has been looking for ways to lift retail investor engagement with their super savings and at the same time help super funds better communicate with their members.
We have worked on two projects that will bring into line the annual reporting obligations of super funds with companies, while ensuring that super fund members get more meaningful information about their super. This means that super funds will be able to put their annual reports on a website as a default (consistent with companies), but only where they give each super fund member information about longer-term returns in their personal member benefit statement. The rationale for this condition is that it is important that super fund members appreciate that super is a long-term investment. If fund members focus only on short-term returns, rather than on returns over time, they risk switching investment options or funds to their long-term detriment.
1. Online delivery of super annual reports
The first piece of work is a proposal to grant relief to allow super funds to use a website as the default method of delivering annual fund information (annual report) to members where certain conditions are met.
ASIC consulted on the broad question of whether super funds should be allowed to use a website as the default method for delivering annual fund information earlier this year (Consultation Paper 93 Facilitating online financial services disclosures (CP 93)).
Feedback on the proposed relief was overwhelmingly positive and many super funds saw the potential for substantial cost savings and wanted to rely on this relief for the upcoming reporting period (i.e. for the year ending 30 June 2008).
We have decided that for this year we will allow super funds to use the website as a default where certain conditions are satisfied. One condition is that super funds give members information about medium and long-term returns with the periodic statement (member benefit statement). Where super funds comply with the attached conditions, they will not need to apply for individual relief from ASIC. We are taking a ‘no action’ approach to this issue this year while we finalise our policy position on online disclosure generally.
‘Nearly everyone who responded to our electronic disclosure consultation thought less paper in super was a good idea. Now that super returns are likely to be down this year on past years, we think it is a good time to roll this out and any cost savings will be welcomed by members’, ASIC’s Deputy Chairman, Mr Jeremy Cooper said.
2. Regulatory guide on super periodic statements
The second piece of work is a regulatory guide aimed at improving investor engagement with the long-term nature of their investment in super.
We think that many super funds will want to provide a longer-term picture of super returns to members who might not fully appreciate that super returns fluctuate over time and that even negative returns during some periods can be consistent with successful long-term investment. Not having this perspective might result in some fund members focussing on short-term results and, in a year of negative returns, potentially engaging in switching behaviour to their ultimate detriment. This work follows the findings of the Government’s Super Advisory Group that reporting long-term super fund performance will help members.
There is currently a requirement to provide information about the last five years’ returns in the fund’s annual report. In contrast, super periodic statements contain information that is specific to individual members. We therefore think that it is more useful to convey such information with periodic statements than in annual reports.
Regulatory Guide 191: Superannuation: helping investors look at longer-term returns—ASIC’s best practice guide (RG 191) provides practical information on how super funds can provide members with a picture of historical super fund returns. For future years, we encourage super funds to work towards providing members with personalised historical returns (or fund returns) for five and 10-year periods with their periodic statements. This is best practice guidance only and is not mandatory. It is only where funds want to take advantage of the annual report relief that historical return information will be required to be included with the periodic statement.
2008 reporting season – option to use ASIC's leaflet on long-term returns
For the 2008 reporting season, super funds that want the annual report relief have the option of including an ASIC leaflet (or an electronic link to the leaflet if member consent has been given to receive the periodic statement electronically) that contains information about long-term performance for typical super fund investment options, with periodic statements sent to members. The FIDO (ASIC’s consumer website) publication, Long-term performance figures for typical super fund investment options is attached to this release. We believe this will benefit members and is a cost-effective option for super funds that want to utilise the annual report relief.
A super fund’s investment performance will change from year to year. Because super is a long-term investment, five and 10-year performance figures tend to smooth out short-term results giving members some perspective on current year over-performance or under-performance. Past performance is not a reliable predictor of future performance, but longer-term historical data should be a more useful guide to members in assessing the relevance of current year returns to their retirement savings goals.
Download:
End of release
Attachment – conditions for no-action approach
1. A copy of the annual super report must be readily accessible online.
2. The trustee must directly notify each member at least once that:
a. they can access the annual super report online; and
b. if they do not wish to access the information online, they can elect to receive a copy of the annual super report for each reporting period free of charge.
This can be done in other materials sent to members, such as the periodic statement, provided that the notification is made prominently.
3. If a member does not make an election, the trustee must notify the member annually that they can access a copy of the annual super report online or can elect to receive a hard copy, provided that the notification is made prominently. This can be done in other materials sent to members, such as the periodic statement. (This condition is consistent with s314 of the Corporations Act 2001, which applies to annual reports for companies).
4. Members must be provided with information about medium and long-term returns with the periodic statement. Regulatory Guide 191: Superannuation: helping investors look at longer-term returns (RG 191) suggests how this information can be provided.
ASIC Website: Printed 01/07/2009
