Who Regulates Superannuation in Australia?
The superannuation sector is regulated in a similar way to banks, with regulators including the ATO, ASIC and APRA. Here's how super is regulated and the rules you should know.
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The superannuation sector is highly regulated. All super funds operate under regulations devised by two Acts of Parliament – the Superannuation Industry (Supervision) Act 1993 and the Financial Services Reform Act 2002. Employer contributions made to their employee's superannuation fund are regulated by the Superannuation Guarantee (Administration) Act 1992.
Superannuation rules you should know about as an employee
If you're a member of a super fund, here's what rules you should be aware of.
- Your employer is legally required to pay you super (this is called the super guarantee) on your annual earnings. They should pay this at least 4 times a year.
- You're entitled to super even if you're a casual worker or you're on a low income.
- You're allowed to choose your own super fund, and aren't required to join your employer's preferred fund.
- When you change jobs, you're entitled to keep your existing super fund and aren't required to open a new one if you don't want to.
- You're allowed to make extra contributions to your super if you'd like to, although there are annual caps on this.
There are five separate bodies that supervise Australian super funds to ensure that they comply with the relevant legislation. These regulatory bodies are:
1. The Superannuation Complaints Tribunal (SCT)
The SCT operates under the auspices of the Superannuation (Resolution of Complaints) Act 1993. This Act outlines the process for dealing with any complaints about superannuation.
An independent dispute resolution body, the SCT offers a free and easily accessible alternative to the court system. It can deal with complaints about the decision and conduct of:
- The trustees of a regulated superannuation fund
- People acting on the trustee's behalf
- Insurers in relation to insurance policies provided through super funds
The SCT formally reviews complaints and can then provide a remedy to any adverse impact you have suffered.
2. The Australian Taxation Office (ATO)
The ATO is charged with ensuring that SMSFs comply with all the necessary rules and regulations. It also has the responsibility of ensuring the correct taxation is applied to all superannuation savings held in those funds.
3. The Australian Securities and Investments Commission (ASIC)
ASIC's role is to protect consumer rights in the financial services sector, including superannuation. It enforces the Corporations Act 2001 which regulates the conduct and disclosure obligations of superannuation trustees to their fund members.
4. The Australian Prudential Regulation Authority (APRA)
APRA is charged with supervising regulated superannuation funds (other than SMSFs). It reviews each fund's compliance with the Superannuation Industry (Supervision) Act 1993 (Cth), ensuring that those funds are prudently managed at all times.
5. The Department of Human Services (DHS)
The DHS is responsible for the administration of applications from superannuation fund members for the early release of super on compassionate grounds.
The Australian Treasury’s policy advice on superannuation falls under three broad categories.
- Retirement income policy. Treasury advises on retirement income policy, which includes the objectives, adequacy and overarching framework and design of Australia's superannuation system. It is also responsible for the modelling and analysis of government policy's impact on households as well as the financial consequences of demographic tendencies and the country's ageing population.
- Prudential policy. The Australian Treasury works closely with APRA to advise the Australian Government on the prudential regulation of superannuation. APRA’s role is to make sure that trustees are aware to their responsibilities to members and that they manage funds in the best interests of those members.
- Consumer Protection. Treasury also advises the Government about consumer protection for superannuation fund members. Treasury also works closely with ASIC, which promotes informed participation for consumers in the financial system, and oversees the Superannuation Complaints Tribunal.
The two acts of parliament overseeing superannuation in Australia
This is the key piece of legislation that outlines how superannuation funds can operate. It sets out:
- To act honestly in all matters
- To exercise the same degree of care, skill and diligence as an ordinary prudent person would exercise when investing money
- To keep the fund's assets separate from other assets
- To act in the best interests of fund members
- To develop and implement an investment strategy
- To ensure sufficient reserves to pay member’s benefits
- To provide fund members with access to certain information
- An accurate account or documentation should be provided at all times
- Make sure that all accounts are accurate and properly noted
- Keep records of meetings and agendas that have transpired among trustees
- Lodge an annual return to APRA
- Get the accounts and audited every year
Under this category, the Superannuation Industry Act advises the trustee to consider:
- The risks and returns of all investments after formulating the objectives and strategies of the funds
- The mix of investments included in the fund's portfolio
- The fund's cash flow requirements
- The need for the fund to meet any current or potential future liabilities
This Act has a broad scope and aims to provide the finance industry with a certain level of standardisation. It determines that a superannuation fund trustee must be licensed before being allowed to operate a fund. In short, the Financial Services Reform Act 2002 performs the following roles:
- The provision for licensing of individuals who provide financial services or products, known as "dealers".
- Establishes a standard of conduct for financial services providers, including what constitutes misconduct in regards to the management of superannuation funds.
- Oversees training programs for agents who represent dealers.
- Sets out the level of information that must be provided on financial products sent to fund members and prospective fund members.
If you're a member of a superannuation fund, you can rest assured knowing the fund's trustee is bound by law to always make decisions in the best interest of all fund members. This includes investment decisions and decisions around fund spending and advertising.
There will be a trust deed that outlines the fund rules that the trustee must also comply with, as well as the above legislation. If the trustee fails to properly carry out their obligations in any way, they may be penalised or even removed from their office as trustee.
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