5th Financial Services Forum  Renovating the Financial System  13 and 14 May 2010 Sydney


Current Issues:Super Benefit Projections,Web-calculators and Fee Disclosure
Benefit Projections Working Group

 (printed) Benefit projections

  • Web calculators
  • Fees and costs

Olden days
ISC circulars 2003ish
FSR advice / Calculators withdrawn 2004
IAAust Guidance 2005
Web calculator class order 05/1122
July 2008 ASIC consultation paper 101
April 2009 IAAust GN revised 2009
July 2009 Intra fund advice class order (09/210)
Oct 2009  ASIC consultation paper 122 / Draft RegulatoryGuide
Jan 2010 Australian Govt Actuary consultation April 2010
Cooper –suggested compulsory projections as part of MySuper



Benefit Projections -proposed ASIC rules (CP122)


• Printed Statements (not calculators)
• Voluntary not mandatory
• Relief from advice requirements Corp Law
• Once a year with Benefit statements
• Doesn’t apply to DB(?), SMSFs, ERFs
• Prescribed assumptions
• Some standard disclosure eg:
• today’sdollars deflated by wage based measures
•Conversion to income stream


Benefit Projections -proposed ASIC rules (CP122)


• Must NOT include age pension
• Standardised fees
• Only one calculation –cannot show impact of additional conts / different retirement age


Benefit Projections -proposed ASIC rules (CP122)


• Prescribed assumptions set by ASIC based on advice by Australia Government Actuary:
• Investment Return,
• Inflation,
• Fees,
• Longevity
• Proposed approach –commutation factors


Benefit Projections -proposed ASIC rules (CP122)


IAAust view:
• Conflicting interaction with intra fund advice
• Should be less prescription for voluntary projections (eg fee basis, more than one contribution basis etc)
• Allow more than once a year
• Allow age pension


“SuperFunds” Feb 2010 –John Burnett


“…it should be possible for the Australian Government Actuary to establish [on specified assumptions] a  table which shows for each level of superannuation income [in today’s dollars], the corresponding combined income including the age pension.”


Benefit Projections -Intra fund advice rules


• Printed Benefit Projections are financial product advice and need to be issued as Statement of Advice
• Impractical to do this for large funds as need to have “reasonable basis for advice”
• Intra fund advice class order removes this obstacle
• No restrictions on assumptions etc


Benefit Projections –Cooper (MySuper)


Forecast of Retirement benefits.....................The Panel believes that possibly the largest engagement hurdle is getting members to understand whether their current contribution strategy is likely to provide them with an adequate income in retirement.  This involes the multi-tiered challenges of focusing them on future events, current savings habits and the conversion of their lump-sum thinking into replacement rate thinking; what proportion of their income will they need to live on in retirement?   The closest thing to addressing these challenges are the current policy ideas embodied in ASIC's Consultation Paper 122 Superannuation Forecasts.  The Panel believes these ideas should become mandatory for Mysuper products , subject to further refinement of the policy ideas in ASIC's consultation process.


Web calculators


• Exempt from advice provisions –Class Order 05/1122

• IAAust argued for same rules for both printed and calculators

• Class Order requires Reasonable Basis for assumptions / no prescription

• CP122 says Reasonable Basis best satisfied by being “as close as possible”

to printed projections basis


Fees and cost disclosure


• Short form PDS draft regulations
• Ripoll
• Cooper / IAAust submission


Fees and costs -PDS


• Requires a projection of fees and costs over 10 years.
• Expressed as a % of assets
• No split admin / investment
• IAAust and ASFA expressed concerns re potential to be misleading
• Consultation concluded:


Standard example of our balanced option:..............Based on the fees and cost outlines above if you transfer an existing super balance of $100,000 into a balanced option and a further $5,000 goes in each year for the next 10 years you have paid up to $25,000 if you withdraw at the end of 10 yearsThis is an overall cost of 1.3% of your balance per year.  This is based on standard assumptions that all super funds must use.  This means you can use this example to compare XYZ's fees and costs with other funds.  However, the actual fees and costs you will pay will depend on what investment options you choose and how well those investments perform.


Fees and costs –Ripoll + “The future of financial advice”(govt response)


• Big items: remuneration and duties
• Disclosure recommendations accepted by Govt:
• Improved disclosure of remuneration / conflicts through FSGs
• Adviser Charging regime –“Dollar based” disclosure of remuneration


Fees and costs -Cooper


“My Super”:

• No cross-subsidisation / formal policy on cost allocation
• Separate accounting for MySuper division
• No entry fees / Exit fees cost recovery only
• Fee schedules / discounts to be explicit
• Performance based fees to meet standards
• Benchmarking of “administration costs per member”


 Attachment to [IR 05-64]: ASIC releases a new policy on the regulation of generic financial calculators

[CO 05/1122] provides licensing or disclosure and conduct relief for providers of financial calculators that meet certain minimum conditions. The relief only applies where:

  • the calculator does not advertise or promote a specific financial product;
  • if the calculator is an electronic facility or device, the calculator enables a person using it to alter the default assumptions applied by the calculator (other than a statutory assumption that reflects a rate or amount of fixed by legislation) and performs a calculation using the changed assumptions;
  • the default assumptions applied by the calculator are, unless changed by the user, reasonable;
  • the calculator will display to the user in the ordinary course of its use or have printed on it all of the following:
    • a clear and prominent statement about the purpose and limitations of the calculator;
    • a clear and prominent explanation of why the default assumptions, including any statutory assumption, are reasonable;
    • a clear and prominent explanation of the impact of any significant limitation of the calculator;
    • where the calculator estimates an amount payable at a future time—a clear and prominent statement specifying whether or not the estimate takes into account an assumed change in the cost of living between the time of the preparation of the estimate and the future time; and
    • a clear and prominent statement to the effect that the calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product and that the user should consider obtaining advice from a financial services licensee before making any financial decisions;
  • if the calculator is an electronic facility or device—the calculator does not prevent the user from readily printing or electronically storing the estimate; and
  • the provider keeps a copy of the calculator for 7 years from when it is first made available.

[CO 05/1122] also revokes Class Order [CO 05/611] Relief for providers of superannuation calculators. [CO 05/611] provided licensing or conduct and disclosure relief to providers of generic superannuation calculators. Providers of generic superannuation calculators can now rely on [CO 05/1122].