ASIC released Information Sheet 197 Fee and cost disclosure requirements for superannuation trustees yesterday.
“We will adopt a measured approach during this period, where inadvertent breaches arise or systems changes are underway, provided that industry participants are making reasonable efforts to comply,” said the corporate regulator.
ASIC said it intends to undertake further consultation on the main aspects of fee and cost disclosure, such as double-counting and look-through arrangements in indirect costs.
After further consultation it will undertake a comprehensive update of its fee and cost disclosure guidance in Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements.
In terms of PDS disclosure, ASIC said it expects superannuation trustees will disclose a separate fees and costs table for each MySuper product and Choice product.
These fees and costs tables must include the investment fee, administration fee, buy-sell spread, switching fee, exit fee, advice fees relating to all members investing in a particular product, indirect cost ratio and other fees and costs.
The information sheet said trustees must also disclose indirect costs which the information sheet defined as “any amount that the trustee knows, or reasonably ought to know, will directly or indirectly reduce the return on the investment of a member, where this amount is not charged as a fee”.
ASIC said it has also changed the definition of performance fees to reflect the different types of products on offer.
“Trustees should also be aware that the new definition of ‘investment fee’ for superannuation products now incorporates performance fees,” said the corporate regulator.
Changes to cl 209 of Sch 10 of the Corporate Regulations Act will also require trustees to provide a statement about how performance fees affect administration fees and investment fees for a superannuation product.
The practice of funds showing the previous year’s performance fees as a reflection of what will occur in the current year is something ASIC considers misleading, according to the information sheet.
“Our expectation is that trustees will not simply reflect past performance fees for future years, but will make assumption-based estimates of future performance fees, which allow for meaningful comparison between superannuation funds,” said ASIC.
The corporate regulator also said PDSs for superannuation products must also include the phrase; “Your employer may be able to negotiate to pay lower administration fees”.
