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

Week 7

4 Pages
55 Views
Unlock Document

Department
Accountancy
Course
AYB240
Professor
All Professors
Semester
Summer

Description
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


OR

Join OneClass

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

Sign up

Join to view


OR

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.


Submit