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17-282MR Super fees set to become more transparent and easier to understand
From 30 September there will be significant changes to the way superannuation and managed investment funds disclose the fees and charges that affect consumers.
The new requirement follows the Australian Securities and Investments Commission (ASIC) identifying a significant amount of under-reporting of fees, as well as considerable inconsistency in the way fees and charges are listed by funds. ASIC found this made it very difficult for consumers to understand how much they were paying, what they were paying for, and to compare funds.
The changes will help bring industry-wide consistency to exactly what must be included in the product disclosure statement (PDS). And, from later in 2018, the changes will also ensure that the information in PDS and in periodic statements will match more clearly. As a result, consumers will be better able to understand the fees and costs. The consistency and more accurate disclosure of fees will also help ensure that funds are competing more fairly.
ASIC also noted that the fees consumers are being charged may reflect the type of investment, with some higher cost investments also bringing higher returns in the long term. This change to reporting will also make it easier for consumers to identify when this may be the case.
ASIC will make amendments to provide more certainty around the relevant requirements and undertake compliance checks throughout the industry, to ensure funds are meeting their obligations.
Following extensive consultation with industry on the introduction of these changes, ASIC has agreed to extend the deadline for disclosure of property operating costs in the investment fee or indirect costs to 30 September 2018. The extension on this component will help provide additional time for discussions between ASIC and industry about how to calculate these fees.
ASIC has also extended the deadline for certain disclosures in periodic statements that require changes to the internal systems of funds. This is to ensure the change can be made in a cost effective manner. Those requirements will have effect for annual statements for the year ending 30 June 2018.
These changes to reporting of superannuation and managed funds fees arise from ASIC's concerns with inconsistency and under-reporting of fees. This issue was investigated in Report 398 Fee and cost disclosure: Superannuation and managed investment products, which identified the following key issues:
- under-disclosure of fees and costs associated with investing indirectly through other vehicles
- tax treatment of fees and costs
- performance fees
- under disclosure of management costs
Following the release of Report 398, in November 2015 ASIC issued updated Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements to bring greater consistency and transparency to fees reporting. These changes are due to come into force from 30 September 2017, as outlined above.
Further information on these changes can be found at:
- Summary of proposed changes to Class Order [CO 14/1252]
- Fees and costs disclosure requirements for superannuation trustees
- Super fees on the MoneySmart website
Editor's note 1:
ASIC made a legislative instrument (ASIC Corporations (Amendment) Instrument 2017/664) to give effect to the extension of the deadline for disclosure of property operating costs in the investment fees or indirect costs to 30 September 2018 and other amendments to provide more certainty about the fees and costs disclosure requirements.