The Australian Securities and Investments Commission (ASIC) today announced relief for providers of superannuation calculators relating to licensing, conduct and disclosure requirements, and guidance in relation to the conditions associated with the relief.

Superannuation calculators are electronic facilities that assist users to estimate the total value of their superannuation at a future point in time or the estimated level of regular contribution required to reach a target value.

The relief, which is provided under ASIC Class Order [CO 05/611] Relief for providers of superannuation calculators, means that providers of superannuation calculators, who meet certain minimum conditions, do not require an Australian financial services licence with an advice authorisation and, if already licensed, do not need to meet the advice conduct and disclosure requirements in Part 7.7 of the Corporations Act 2001 (the Act).

The relief is limited to provision of superannuation calculators, and reflects the administrative position taken by ASIC in its Information Release [IR 04-17] ASIC provides guidance on superannuation calculators.

It is the first part of relief and guidance provided by ASIC in relation to calculators under the Federal Government’s Refinements to Financial Services Regulation, and was foreshadowed in ASIC Information Release [IR 05-22] ASIC provides guidance on financial services refinement projects.

‘ASIC is aware that many consumers find calculators of this kind useful when they are planning for retirement, and we would expect greater usage of these calculators in an environment of super choice’, ASIC Executive Director of Regulation, Mr Malcolm Rodgers said.

‘We have provided this relief to deliver legal certainty for providers of superannuation calculators leading up to commencement of super choice on 1 July 2005. However, we remind providers of these facilities of the need to design their superannuation calculators responsibly.

‘In particular, we are concerned to ensure that providers inform users about the assumptions used to generate the results, that the assumptions are reasonable and that they clearly explain to the user any limitations of the calculator’, Mr Rodgers said.

A recent ASIC review of some publicly available superannuation calculators found that a wide range of results were generated by functionally similar tools, despite using uniform data. Details of the review are set out in the attachment to this information release.

The conditions provided as part of ASIC’s relief respond to some of the issues identified during this review.

‘The divergence in practices we found is partly the result of an absence of accepted industry standard for assumptions, or disclosures about those assumptions’, Mr Rodgers said.

‘The conditions of this relief are designed to help providers of superannuation calculators meet minimum standards of good practice. However, we expect industry to develop their own guidelines outlining acceptable assumptions and disclosures as soon as possible. Until these standards are developed, we encourage providers to take a critical look at the quality of calculators they provide’, Mr Rodgers added.

ASIC’s own superannuation calculator provides an example of a calculator that effectively discloses assumptions. This calculator has recently been revised to provide more options to users, and is available on ASIC’s consumer website, FIDO, at www.fido.gov.au.

Conditions of ASIC’s relief

ASIC’s class order relief exempts providers of superannuation calculators from the need to hold a financial services licence, or, where the provider is already licensed, from some of the conduct and disclosure provisions in Part 7.7 of the Act.

The relief only applies where:

1. the superannuation calculator allows the user to change default assumptions;
2. the default assumptions are reasonable;
3. the calculator displays a clear and prominent statement:
   1. about the purpose and any limitations of the calculator;
   2. of why the default assumptions are reasonable;
   3. whether or not the estimate of total value of superannuation at a future time takes into account an assumed change in the cost of living between now and the future time; and
   4. that the calculator is not intended to be relied on for the purposes of making a decision about a financial product and that the user should consider obtaining advice from a financial services licensee or their representatives before making any financial decisions;
4. the calculator does not prevent the user from readily printing or electronically storing a relevant estimate;
5. the calculator does not generate advice about a specific financial product.

The guidance on meeting these conditions of relief is set out in the attachment to this information release.

Providers are reminded that these calculators remain subject to the consumer protection provisions of the Australian Securities and Investments Commission Act 2001, including prohibitions against misleading and deceptive conduct and false representations, not withstanding the relief.

End of release

Download a copy of:

• Class Order [CO 05/611] Relief for providers of superannuation calculators
• Information Release [IR 04-17] ASIC provides guidance on superannuation calculators
• Information Release [IR 05-22] ASIC provides guidance on financial services refinement projects
• FIDO's super calculator

Attachment to Information Release [05-32]: Guidance about online superannuation calculators:

ASIC’s findings: same facts but widely different results

In May 2005, ASIC reviewed 24 online superannuation calculators that allow superannuants to estimate their future superannuation benefits.

ASIC sought to determine if someone using these calculators would get broadly similar results regardless of which calculator they used by inputting the same facts, and comparing the dollar estimates generated by each calculator.

ASIC’s case study assumed a 35 year old man, with $50,000 in super, a salary of $55,000 per year, intending to retire at age 65. We relied on default rates of return and default values for fees and charges wherever available. Our results are grouped by industry sector in the table below:

On the same facts, we found widely differing results, ranging from $283,000 up to $966,000. The user information provided with the calculators was generally inadequate to explain the differences.

ASIC accepts that differences in results from the same facts will arise naturally from reasonable variations in assumptions and mathematical processes. Large differences may still be reasonable if a calculator is based on a specific fund or investment strategy, and users are provided with enough information to account for the difference.

However, as key information was absent in some circumstances, for example, whether the result was given in today’s values, ASIC is asking providers to critically assess their calculators to ensure that their results will not mislead users.

ASIC will continue to monitor online superannuation calculators, with a particular focus on the issues identified as part of its review.

ASIC guidance

ASIC has identified three factors as being critical to developing useful and reliable calculators. These are:

1. Using reasonable assumptions,
2. Adequately disclosing and explaining any limitations and the impact of those limitations for the user,
3. Expressing estimates of future values in today’s terms.

In responding to these factors, ASIC has developed some of the key questions that providers of calculators should consider:

The Australian Securities and Investments Commission (ASIC) today announced relief for providers of superannuation calculators relating to licensing, conduct and disclosure requirements, and guidance in relation to the conditions associated with the relief.

Superannuation calculators are electronic facilities that assist users to estimate the total value of their superannuation at a future point in time or the estimated level of regular contribution required to reach a target value.

The relief, which is provided under ASIC Class Order [CO 05/611] Relief for providers of superannuation calculators, means that providers of superannuation calculators, who meet certain minimum conditions, do not require an Australian financial services licence with an advice authorisation and, if already licensed, do not need to meet the advice conduct and disclosure requirements in Part 7.7 of the Corporations Act 2001 (the Act).

The relief is limited to provision of superannuation calculators, and reflects the administrative position taken by ASIC in its Information Release [IR 04-17] ASIC provides guidance on superannuation calculators.

It is the first part of relief and guidance provided by ASIC in relation to calculators under the Federal Government’s Refinements to Financial Services Regulation, and was foreshadowed in ASIC Information Release [IR 05-22] ASIC provides guidance on financial services refinement projects.

‘ASIC is aware that many consumers find calculators of this kind useful when they are planning for retirement, and we would expect greater usage of these calculators in an environment of super choice’, ASIC Executive Director of Regulation, Mr Malcolm Rodgers said.

‘We have provided this relief to deliver legal certainty for providers of superannuation calculators leading up to commencement of super choice on 1 July 2005. However, we remind providers of these facilities of the need to design their superannuation calculators responsibly.

‘In particular, we are concerned to ensure that providers inform users about the assumptions used to generate the results, that the assumptions are reasonable and that they clearly explain to the user any limitations of the calculator’, Mr Rodgers said.

A recent ASIC review of some publicly available superannuation calculators found that a wide range of results were generated by functionally similar tools, despite using uniform data. Details of the review are set out in the attachment to this information release.

The conditions provided as part of ASIC’s relief respond to some of the issues identified during this review.

‘The divergence in practices we found is partly the result of an absence of accepted industry standard for assumptions, or disclosures about those assumptions’, Mr Rodgers said.

‘The conditions of this relief are designed to help providers of superannuation calculators meet minimum standards of good practice. However, we expect industry to develop their own guidelines outlining acceptable assumptions and disclosures as soon as possible. Until these standards are developed, we encourage providers to take a critical look at the quality of calculators they provide’, Mr Rodgers added.

ASIC’s own superannuation calculator provides an example of a calculator that effectively discloses assumptions. This calculator has recently been revised to provide more options to users, and is available on ASIC’s consumer website, FIDO, at www.fido.gov.au.

Conditions of ASIC’s relief

ASIC’s class order relief exempts providers of superannuation calculators from the need to hold a financial services licence, or, where the provider is already licensed, from some of the conduct and disclosure provisions in Part 7.7 of the Act.

The relief only applies where:

1.    the superannuation calculator allows the user to change default assumptions;

2.    the default assumptions are reasonable;

3.    the calculator displays a clear and prominent statement:

1.    about the purpose and any limitations of the calculator;

2.    of why the default assumptions are reasonable;

3.    whether or not the estimate of total value of superannuation at a future time takes into account an assumed change in the cost of living between now and the future time; and

4.    that the calculator is not intended to be relied on for the purposes of making a decision about a financial product and that the user should consider obtaining advice from a financial services licensee or their representatives before making any financial decisions;

4.    the calculator does not prevent the user from readily printing or electronically storing a relevant estimate;

5.    the calculator does not generate advice about a specific financial product.

The guidance on meeting these conditions of relief is set out in the attachment to this information release.

Providers are reminded that these calculators remain subject to the consumer protection provisions of the Australian Securities and Investments Commission Act 2001, including prohibitions against misleading and deceptive conduct and false representations, not withstanding the relief.

End of release

Download a copy of:

·         Class Order [CO 05/611] Relief for providers of superannuation calculators

·         Information Release [IR 04-17] ASIC provides guidance on superannuation calculators

·         Information Release [IR 05-22] ASIC provides guidance on financial services refinement projects

·         FIDO's super calculator

Attachment to Information Release [05-32]: Guidance about online superannuation calculators:

ASIC’s findings: same facts but widely different results

In May 2005, ASIC reviewed 24 online superannuation calculators that allow superannuants to estimate their future superannuation benefits.

ASIC sought to determine if someone using these calculators would get broadly similar results regardless of which calculator they used by inputting the same facts, and comparing the dollar estimates generated by each calculator.

ASIC’s case study assumed a 35 year old man, with $50,000 in super, a salary of $55,000 per year, intending to retire at age 65. We relied on default rates of return and default values for fees and charges wherever available. Our results are grouped by industry sector in the table below:

On the same facts, we found widely differing results, ranging from $283,000 up to $966,000. The user information provided with the calculators was generally inadequate to explain the differences.

ASIC accepts that differences in results from the same facts will arise naturally from reasonable variations in assumptions and mathematical processes. Large differences may still be reasonable if a calculator is based on a specific fund or investment strategy, and users are provided with enough information to account for the difference.

However, as key information was absent in some circumstances, for example, whether the result was given in today’s values, ASIC is asking providers to critically assess their calculators to ensure that their results will not mislead users.

ASIC will continue to monitor online superannuation calculators, with a particular focus on the issues identified as part of its review.

ASIC guidance

ASIC has identified three factors as being critical to developing useful and reliable calculators. These are:

1.    Using reasonable assumptions,

2.    Adequately disclosing and explaining any limitations and the impact of those limitations for the user,

3.    Expressing estimates of future values in today’s terms.

In responding to these factors, ASIC has developed some of the key questions that providers of calculators should consider: