Class Notes (834,814)
Australia (1,844)
Accountancy (152)
AYB240 (15)
All (15)

Week 7

4 Pages
Unlock Document

All Professors

1 AYB240 – SUPERANNUATION REGULATION AND PRACTICE LECTURE 7: MEMBER DECISION MAKING FUND AND INVESTMENT CHOICE Types of Member Choices  Two types of choices o Which superannuation fund to join o Choose an investment option within their chosen superannuation fund History of Fund Choice  In 1996 - Coalition policy to introduce fund choice  In 1997 newly elected Coalition Government moved to implement choice policy o Rationale for Choice of Fund  Increase competition and efficiency in the superannuation industry  Lead to improved returns on superannuation savings  Place downward pressure on fund admin charges o During following years several attempts to introduce choice  Two Senate Committee inquiries ; a round table discussion; wide-ranging consultation with superannuation industry leaders and others o Consensus on proposals not reached o Choice not opposed but concerns about  Inadequate consumer protection measures  Inadequate disclosure regulation  Inadequate financial literacy skills  Choice of Fund legislation passed in 2004 with support of minority parties in the Senate o Came into effect 1 July 2005 Choice of Super Funds Regime  Employers required to offer employees Choice of Fund o Included in the Superannuation Guarantee (Administration) Act 1992 o Commenced 1 July 2005  Generally applies where 9% superannuation guarantee contributions are required Employer Compliance  Employers comply with Choice of Fund legislation if SG contributions made to o A fund nominated by the employee o A fund chosen by the employee from the options offered by the employer o The default fund selected by the employer  If the employee fails to select a fund Do all employees have choice of fund? - NO!  Choice of Fund not available to o Members of certain public sector funds o Employees for whom super contributions are made under  Certain workplace agreements  A State award or industrial agreement o Defined benefit fund members 2 How is choice of fund offered?  New employees given “standard choice form” within 28 days of commencement  Standard choice form contents o Name of default fund  If employee does not make a choice o Contact details to obtain the fund’s PDS o Statement about whether contributions are > 9%  if higher, what will happen if another fund chosen Default Fund  Fund must offer a “default fund”  Default fund must o Offer insurance in respect of the employee  Subject to certain exceptions o Be a complying superannuation fund or RSA Choosing a different fund  Employees can “switch” funds within time guidelines  Can do in accordance with statutory requirements for compliance  Employer has right to refuse certain chosen funds Licensing Requirements  Employer cannot provide advice on choice of fund (unless holds AFS licence) o May provide factual information  Explain Choice of Fund, employer’s obligations, how employees can nominate a fund  Anyone providing advice on switching funds must comply with AFS licensing requirements and provide a relevant Statement of Advice to the member Underlying Assumptions regarding choice  Assumes consumers able and willing to make informed choices  BUT compulsory super suggests most individuals need assistance to save for retirement Has fund choice been successful?  Generally reported that 80-90% do not choose and are in default option  Around 4% switch funds o Half of those occur with job change  Number of multiple accounts not reduced  “Competition” has not resulted in greater efficiencies - fees not declined, ↑ admin
More Less

Related notes for AYB240

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.