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10-220MR Review of superannuation PDSs underlines need for high-quality disclosure to consumers

Thursday 28 October 2010

ASIC says product disclosure statements (PDSs) for superannuation products could be improved considerably by keeping disclosure up to date, making them more informative and easier to understand for consumers.

In 2010, ASIC reviewed the quality of 200 PDSs for superannuation products. The review covered different types of issuers and superannuation funds with a range of different business models. Content requirements for PDSs are primarily set out in Part 7.9 of the Corporations Act 2001.

ASIC has released a report on its review of the superannuation PDSs today, Report 214 Review of superannuation PDSs (REP 214 ).

ASIC Commissioner, Mr Greg Medcraft said the review underlined the need for PDSs to inform consumers on the trade-off between risks and potential returns.

‘Many of the PDSs reviewed give an overview of investment risks without clearly indicating which risks apply to specific investments or investment options. This may result in consumers not knowing the practical risks they face in choosing a particular option, as well as not being able to differentiate between the different options offered to them.’

Further, the review found superannuation PDSs that were not up to date and, in particular, did not include the reduced concessional contribution caps announced by the Government in the 2009 Budget. Consumers may rely on this information and over-contribute superannuation contributions, which can have serious tax consequences.

Mr Medcraft encouraged trustees to act now to revise their disclosure documents, ‘Out of date disclosure documents are a risk for consumers who are not being provided with adequate information on which to base their investment decisions.’

While superannuation PDS requirements are about to change - to introduce shorter and simpler PDSs - ASIC says many of its findings would apply to shorter and simpler PDSs as well as the current long-form ones.

Shorter and simpler PDSs are required from 22 June 2011 for all new superannuation products (and simple managed investment schemes) and from 1 January 2011 for standard margin-lending facilities.

ASIC has acted to improve deficient PDSs found in the review, often by reaching agreement with PDS issuers, who have generally been responsive to ASIC’s concerns.

ASIC is also discussing disclosure issues with the superannuation industry as a result of this review and in the lead-up to the simpler and shorter PDS requirements.

For further information:
ASIC Media Unit
Telephone: 1300 208 215
Email: media.unit@asic.gov.au

REP 214

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