Notifying members about superannuation transfers: Accrued default amounts (MySuper transition)

Under amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act), registrable superannuation entity (RSE) licensees will need to be authorised by the Australian Prudential Regulation Authority (APRA) if they wish to offer MySuper products from 1 July 2013. Employers will be required to make default contributions to an RSE licensee offering a MySuper product from 1 January 2014.

Section 29SAA(3) of the SIS Act, and subsequently reg 9.46 of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations), introduces a regime for the notification of transition to MySuper. RSE licensees must provide either:

  • a transition notice to members of a fund with an ‘accrued default amount’ about an intended attribution or transfer to a MySuper product in the same fund or in another fund. This notice must be given at least 90 days before the intended attribution or transfer if there are substantive changes to the member’s benefits, or
  • where changes to the member’s benefits are less substantive, notification up to 12 months after the attribution or transfer occurs, when the transition notice is provided under s1017B(6)(b) of the Corporations Act 2001 (Corporations Act), with some specific content requirements applying in these cases.

An ‘accrued default amount’ for a member of a regulated superannuation fund is the amount of a member’s superannuation interests:

  • where the member has not given the trustee of the fund any direction about the investment option to be applied, or
  • that is invested in the ‘default’ investment option under the current governing rules of the fund (i.e. the investment option that would apply for a new member if no direction were given): see s20B of the SIS Act for the full definition.

This information sheet outlines both types of notification requirements and the circumstances in which they may apply.

This information sheet also provides information about other disclosure requirements that may apply in relation to the transition to MySuper. There are existing requirements in the Corporations Act and Corporations Regulations 2001 (Corporations Regulations) for the disclosure of transactions in periodic statements. These requirements must be complied with in order for adequate disclosure to be provided to fund members about a future attribution or transfer.

What are the notification requirements?

As an RSE licensee, you must provide a transition notice to members of a fund with an accrued default amount at least 90 days before the accrued default amount is attributed or transferred to a MySuper product if the attribution or transfer would result in one or more of the following:

  • an increase in a fee or charge that applies to the amount
  • a reduction in an insured benefit
  • an increase in an insurance premium attributable to the member, or
  • a change in the investment strategy that relates to the amount.

This is to provide members with a reasonable period of time to opt out if they wish to do so.

In ASIC’s view, the transition notice must contain information that reasonably enables members to understand the nature of the changes resulting from the attribution or transfer, and must mention the following:

  • the amount that will be attributed or transferred
  • the name of the MySuper product to which the amount will be attributed or transferred
  • how the member can elect, in writing, to opt out of the attribution or transfer
  • how the member may obtain a Product Disclosure Statement (PDS) for the MySuper product
  • any change in the fees or charges that apply to the amount. The fee or charge must be stated in dollars, unless ASIC grants relief to allow an alternative method of stating the fee or charge to be used
  • any change in the member’s insured benefits as a result of the attribution or transfer
  • any change in the investment strategy applicable to the amount as a result of the attribution of transfer, and

  • any other information the RSE licensee considers the member needs to understand the attribution or transfer.

Although there may be circumstances where the PDS of a new MySuper product is not available at the time of issuing the notice, it will be sufficient for the notice to state the methods available for the member to obtain a PDS at a future date, including a reference to a website, which will be available no later than the date of the attribution or transfer.

When am I exempt from providing a transition notice under reg 9.46?

You are exempt from providing a transition notice under reg 9.46 of the SIS Regulations if the attribution or transfer of a member’s accrued default amount would not result in any of the following changes to the member’s superannuation interest:

  • an increase in a fee or charge that applies to the amount
  • a reduction in an insured benefit
  • an increase in an insurance premium attributable to the member, or
  • a change in the investment strategy that relates to the amount.

However, you must still comply with the significant event notice requirements under s1017B of the Corporations Act: see reg 7.9.11LB of the Corporations Regulations.

The legislation governing the significant event notice requirements has been modified, under the newly substituted s1017B(4) of the Corporations Act, to provide for specific content requirements in the notice relating to the attribution or transfer to a MySuper product. The transition notice must contain the following information:

  • the accrued default amount that was attributed or transferred
  • the name of the MySuper product to which the amount will be attributed or transferred
  • how the member may obtain a PDS for the MySuper product, and
  • any other information that the member needs to understand the attribution or transfer.

When providing this transition notice, you must comply with the timing requirements for notifying members under s1017B of the Corporations Act: see also Information Sheet 90 Notifying members about superannuation transfers without consent (INFO 90)).

We expect the transition notice provided under s1017B will inform fund members about the implications of the change, highlighting where there is no adverse effect on members’ existing superannuation arrangements.

When do I need to notify members?

You must notify members at least 90 days before an attribution or transfer occurs, when providing a transition notice under reg 9.46 of the SIS Regulations, to provide members with a reasonable period of time to opt out, if they choose to do so.

If you are exempt from providing a transition notice under reg 9.46 of the SIS Regulations, your obligation to provide members with a transition notice will be governed by the significant event notice requirements in s1017B of the Corporations Act: see also INFO 90.

Although there are circumstances, under the significant event notice requirements, where you can notify members up to 12 months after an attribution or transfer occurs, it would be desirable to notify members in advance of the event as to the extent possible. This would assist superannuation fund members to understand the material changes or significant events affecting them.

How should I notify members?

You must notify members, in writing, of an attribution or transfer.

The manner in which you choose to notify members in writing must be appropriate in the circumstances, and must be effective. Electronic disclosure is generally more cost-effective and may be used if it is appropriate in the circumstances and you can meet all the requirements for doing so: see also reg 7.9.75B of the Corporations Regulations and Regulatory Guide 221 Facilitating online financial services disclosures (RG 221).

In deciding how to notify members, you should consider:

  • the type of information the notice contains, including whether it contains personal information, general information or both
  • whether members have online access behind a secure wall to their superannuation account, where a significant event notice containing personal information may be made available
  • whether you have a member’s current email address
  • whether you have a member’s current mailing address, and
  • the normal practice that you follow, which members are used to, for issuing significant event notices and other disclosure.

Are there other types of disclosure about an attribution or transfer that I need to consider?

There are additional requirements for disclosure in periodic statements about accrued default amounts that are currently being finalised by the Government (referred to in APRA’s Prudential Practice Guide SPG 410). These will be additional requirements that must be complied with for adequate disclosure to be provided to fund members with an accrued default amount.

However, the Corporations Act, and subsequently the Corporations Regulations, currently requires the disclosure of transactions in periodic statements. In particular, reg 7.9.20 requires periodic statements for superannuation funds to provide specific details, such as the amount of benefits rolled over or otherwise transferred during a reporting period, and reg 7.9.60B requires periodic statements to specify, and include a description of, each transaction. You must therefore provide disclosure in periodic statements of the attribution or transfer of an accrued default amount to a MySuper product, including a description of each attribution or transfer.

It may also be appropriate to provide additional types of disclosure about upcoming changes to member accounts, such as providing

information in member newsletters and in website content. ASIC encourages the early disclosure of changes, including in relation to MySuper transition.

Where can I get more information?

This is Information Sheet 169 (INFO 169). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

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