Shorter PDSs—Complying with requirements for superannuation products, simple managed investment schemes and simple sub-fund products

This is Information Sheet 155 (INFO 155). It provides concise guidance for industry on the requirements of the shorter Product Disclosure Statement regime (shorter PDS regime) for superannuation products, simple managed investment schemes and simple sub-fund products.

It explains:

• generally what requirements apply to Product Disclosure Statements (PDSs) for superannuation products, simple managed investment schemes and simple sub-fund products under the shorter PDS regime
• which financial products are affected.

It also gives guidance on the following specific topics relating to the shorter PDS regime requirements:

• incorporation by reference
• page length
• font size
• warnings
• additional information
• 'white label' products
• whether and how investment options may change
• employer PDSs
• employer-sponsored members
• insurance information
• accumulation and pension interests in the same superannuation fund
• the standard risk measure

The topics in this information sheet are based on the feedback we have received from industry and on the results of review work undertaken by ASIC that has identified areas where industry may benefit from further guidance.

Note 1: The shorter PDS regime is not the same as the Short-Form PDS provisions, which were introduced by the Corporations Amendment Regulations 2005 (No. 5). Under the Short-Form PDS provisions, issuers who are required to provide a PDS have the option of giving retail clients a 'Short-Form PDS' (unless excluded), as long as a full PDS is available on request: see section 1017H of the Corporations Act 2001 (Corporations Act) as inserted by Schedule 10BA of the Corporations Regulations 2001 (Corporations Regulations).

Note 2: In this information sheet, all section references refer to sections of the Corporations Act. All references to schedules and regulations refer to schedules and regulations in the Corporations Regulations.

What requirements apply?

Broadly, if you are an issuer of a superannuation product, simple managed investment scheme or a simple sub-fund product, you must provide disclosure in the form of a shorter PDS, unless an exclusion or relief applies.

Guidance on specific requirements is set out later in this information sheet.

Which financial products are affected?

The financial products affected by the shorter PDS regime are set out in Table 1.

Since the shorter PDS regime came into effect, ASIC has provided interim relief to exempt from the regime superannuation platforms, multifunds and hedge funds. The relief was first provided following a Government announcement on 22 December 2011 that further consultation would be undertaken about whether superannuation platforms, multifunds and hedge funds should be excluded from the regime.

This relief has now been extended to 1 October 2027: see ASIC Corporations (Shorter PDS and Delivery of Accessible Financial Products Disclosure by Platform Operators and Superannuation Trustees) Instrument 2022/497.

ASIC will also consider individual applications for relief made by responsible entities where they consider the operation of ASIC Instrument 2022/497 would produce anomalous results in relation to their fund or funds.

Table 1: Which financial products are affected?

Products affected	Products exempted	Products with relief available
Superannuation products	Superannuation products that: are solely defined benefit interests are solely pension products, or have no investment component (also known as 'risk-only superannuation products')	Superannuation platforms Note: Until 1 October 2027 under ASIC Instrument 2022/497
Simple managed investments schemes	Schemes that are, or are intended to be: quoted on a financial market part of a stapled security property, mortgage or agricultural schemes platforms	Multifunds Certain hedge funds Note: Until 1 October 2027 under ASIC Instrument 2022/497
Simple sub-fund products	Securities in a sub-fund that are, or are intended to be:  quoted on a financial market part of a stapled security member-directed investments into accessible investments	Multifunds Certain hedge funds Note: Until 1 October 2027 under ASIC Instrument 2022/497

Note 1: A ‘simple managed investment scheme’ is a registered scheme that invests at least 80% of its assets in a bank account where funds can be withdrawn within three months, or in arrangements where the investments can be realised at market value within 10 days: see regulation 1.0.02 of the Corporations Regulations.

Note 2: A ‘simple sub-fund product’ is a security in a sub-fund of a retail corporate collective investment vehicle (CCIV) where at least 80% of the assets are invested in a bank account where the funds can be withdrawn within three months, or in arrangements where the investments can be realised at market value within 10 days: see regulation 1.0.02 of the Corporations Regulations.

Note 3: For the definitions of ‘superannuation platform’, ‘multifund’ and ‘hedge fund’, see ASIC Instrument 2022/497 and its explanatory statement, ASIC Corporations (Amendment) Instrument 2022/0940 and its explanatory statement, and Regulatory Guide 240 Hedge funds: Improving disclosure (RG 240).

Where are the requirements set out?

The shorter PDS regime requirements are set out:

• for superannuation products – in Part 7.9 of the Corporations Act as modified by Part 7.9, Division 4, Subdivision 4.2B of the Corporations Regulations
• for simple managed investment schemes – in Part 7.9, Division 4, Subdivision 4.2C of the Corporations Regulations
• for simple sub-fund products – in Part 7.9, Division 4, Subdivision 4.2D of the Corporations Regulations.

The shorter PDS regime fees and costs requirements are set out in Schedule 10D (for superannuation products), Schedule 10E (for simple managed investment schemes) and Schedule 10F (for simple sub-fund products) as modified by Class Order [CO 14/1252] Technical modifications to Schedule 10 of the Corporations Regulations.

For PDSs given on or after 30 September 2022, ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070 applies.

Note: [CO 14/1252] and ASIC Instrument 2019/1070 will be updated for CCIVs.

Guidance on specific requirements

Incorporation by reference

The shorter PDS regime is designed to make PDSs shorter and simpler for consumers and to facilitate comparison between financial products. To achieve this aim, the regime prescribes certain section headings and content for PDSs. This key information must be disclosed in a document that has 8 A4 pages, 16 A5 pages or 24 DL pages (primary document): see Page length for more information.

Extra information and section headings may be included in the primary document provided the prescribed length is not exceeded: see Schedule 10D, clause 2(5), Schedule 10E, clause 2(4) and Schedule 10F, clause 2(4).

Some material is required or permitted to be located separately from the primary document, with a reference to be included in the primary document telling readers where they can find this information: see regulations 7.9.11P, 7.9.11X and 7.9.11ZF. This mechanism is called 'incorporation by reference' and is an important means by which the primary document can be kept short and concise, while providing full information elsewhere for those consumers who wish to read it.

A 'shorter PDS' includes both the primary document and material incorporated into the primary document 'by reference'. Therefore, material incorporated by reference is deemed to be part of the shorter PDS and the full range of liability and enforcement provisions of the law apply to it: see section 1013C(1C) as inserted by Schedule 10A.

As part of our review work, we have seen examples of issuers who tried to use a supplementary PDS to update their shorter PDS. Shorter PDSs cannot be updated in this way: see regulations 7.9.11M, 7.9.11U and 7.9.11ZC. If you update the primary document, you are issuing a new PDS.

When you change fee information or other information in the primary document, you should treat the PDS as a new PDS by re-dating it and lodging it with ASIC's Form FS88 PDS in-use notice.

On the other hand, if you change incorporated documents but not the primary document, no PDS notice is required (unless there is a change to the incorporated fee information, in which case, Form FS89 Notice of change to fees and charges in a PDS should be lodged with ASIC).

If a product ceases to be available to be recommended or offered to new clients, Form FS90 Notice that a product in a PDS has ceased to be available should be lodged with ASIC.

Page length

The primary document must only be a maximum of 8 A4 pages, 16 A5 pages or 24 DL pages in length: see Schedule 10D(1) (for superannuation products), Schedule 10E(1) (for simple managed investment schemes) and Schedule 10F(1) (for simple sub-fund products). However, it is not stipulated whether these are single-sided or double-sided pages.

We consider that the policy intent was that the primary document should be consumer friendly and easy to read. Therefore, the prescribed maximum page length should be treated as a total page length. For example, if a primary document uses A4 paper, it could be 8 single-sided pages, or 4 double-sided pages.

In our review work, we have found that some shorter PDSs are too long.

Font size

We have also found that some shorter PDSs are difficult to read because they use a small font size. You may be tempted to use a smaller font in shorter PDSs because of limited space.

Font size in the primary document must be at least 9 points (except for the issuer's name, address, ACN, ABN or Australian financial services licence number, which must be at least 8 points): see Schedule 10D, clause 1(2), Schedule 10E, clause 1(2) and Schedule 10F, clause 1(2).

We encourage you to consider how easy your PDS is to read – for example, by testing it with potential consumers. You may be able to make the PDS easier to read by increasing the font size and ensuring that the print is not too pale or faint.

Warnings

In our review work, we have found that the required warnings are often not formatted to attract consumers' attention.

The shorter PDS regime requires shorter PDSs to contain certain warnings: see Table 2.

To alert consumers, these warnings must be made prominent. You may be able to amend the formatting of the required words to create emphasis – for example, by:

• increasing their font size
• changing their colour
• putting a box around them
• using a coloured background, or
• inserting a warning symbol next to them.

Table 2: Shorter PDS warnings required by the Corporations Regulations

Warning	Applies to	Reference
Consumer Advisory Warning (in Schedule 10, clause 221) about the impact of fees on long-term returns	Both superannuation products and simple managed investment schemes	Schedule 10D, clause 8(2), Schedule 10E, clause 8(2) and Schedule 10F, clause 8(2)
Additional fees may be paid to a financial adviser if a financial adviser is consulted	Superannuation products, simple managed investment schemes and simple sub-fund products	Schedule 10D, clause 8(9)(a), Schedule 10E, clause 8(9)(a) and Schedule 10F, clause 8(9)(a)
Investing is likely to have tax consequences and consumers are strongly advised to seek professional tax advice	Simple managed investment schemes and simple sub-fund products	Schedule 10E, clause 9(1) and Schedule 10F, clause 9(1)
When choosing an investment option, the person must consider the likely investment return, the risk and their investment timeframe	Simple managed investment schemes and simple sub-fund products	Schedule 10E, clause 7(2) and Schedule 10F, clause 7(2)
When acquiring a superannuation product, consumers should provide their tax file number	Superannuation products	Schedule 10D, clause 9(2)(a)
There will be taxation consequences if a consumer's superannuation contribution caps are exceeded	Superannuation products	Schedule 10D, clause 9(2)(c)
If a superannuation product offers default insurance, unless a person declines or cancels the cover, the cost of the cover will be deducted from their account or contributions	Superannuation products	Schedule 10D, clause 10(3)(g)
Eligibility conditions and exclusions for optional insurance may affect a person's entitlement and should be read before deciding if the insurance is appropriate	Superannuation products	Schedule 10D, clause 10(6)
The level, type, cost or range of costs and any other significant matter about optional insurance should be read before deciding whether the insurance is appropriate	Superannuation products	Schedule 10D, clause 10(7)

Additional information

In addition to material incorporated by reference, primary documents may refer to other information that is set out in another document: see section 1013C(1E) as inserted by regulation 7.9.11N and Schedule 10A (for superannuation products), regulation 7.9.11V and Schedule 10A (for simple managed investment schemes) and regulation 7.9.11ZD and Schedule 10A (for simple sub-fund products).

This information does not form part of the shorter PDS, although it is still subject to certain requirements under the Corporations Act or Corporations Regulations: see section 1013C(1F) as inserted by Schedule 10A.

'White label' products

Many financial conglomerates issue financial products under 'white label' arrangements – that is, the financial products are identical except for the name that brands the financial product.

Where issuers have a number of white label products, each requiring their own primary document, the relevant material incorporated by reference may be identical for each white label product. In such circumstances, the primary documents can incorporate by reference the same material (i.e. material incorporated by reference can relate to more than one primary document) as long as the material incorporated by reference identifies by name, date and version all primary documents to which it relates: see regulations 7.9.11P, 7.9.11X and 7.9.11ZF.

We consider the policy intent is that material incorporated by reference should be easily identifiable and linked to each primary document. Having one generic document for material incorporated by reference with no reference to the name, date or version of the primary documents would not achieve this intent.

Whether and how investment options may change

Shorter PDSs must provide information about how a person may switch their investments in the product: see Schedule 10D, clause 7(9)(a), Schedule 10E, clause 7(7)(a) or Schedule 10F, clause 7(7)(a).

In addition, the PDS must provide information about whether investment options may be changed and, if so, how: see Schedule 10D, clause 7(9)(b), Schedule 10E, clause 7(7)(b) or Schedule 10F, clause 7(7)(b). We interpret this latter requirement as requiring the PDS to state whether the superannuation trustee, responsible entity or corporate director can add, close or alter investment options and, if so, what notice they will give to members or investors.

Employer PDSs

A superannuation trustee must give a shorter PDS to a standard employer sponsor, as well as to members. We understand that the current practice is for superannuation trustees to prepare a separate PDS for employers, focusing on the information that an employer would want to know about the superannuation fund provided for employees.

Under the Corporations Regulations, a shorter PDS for superannuation products must be in the form prescribed in Schedule 10D. This means that a superannuation trustee is limited in its ability to provide a separate, tailored shorter PDS for employers.

To address the issue that a superannuation trustee is unable to incorporate by reference information relevant to an employer in a shorter PDS, we consider that the trustee could give the employer a copy of the shorter PDS for employees together with a non-PDS document outlining any employer-specific information.

Employer-sponsored members

Where an employer-sponsored member of a superannuation fund leaves their employer, the superannuation trustee may transfer them to another division of the fund (e.g. personal division), with a possible increase in fees and insurance premiums or a reduction in benefits.

If this is the case, we regard any potential fee or premium increase, or any loss of benefits arising from the member being transferred to another division of the fund, as a significant feature of the superannuation product that should be disclosed in the shorter PDS in Section 3 'Benefits of investing with [name of superannuation product]'. Section 3 must describe not only significant benefits, but also significant features of the superannuation product: see Schedule 10D, clause 5(1).

Alternatively, you may disclose the consequences of a member leaving their employer in the shorter PDS in Section 4 'Risks of super': see Schedule 10D, clause 6(2).

Insurance information

Certain insurance information must be provided in the primary document if a superannuation product offers insurance cover: see Schedule 10D, clause 10(2). This information includes a summary of the main types of insurance cover that a person can acquire, as well as other required information.

The policy intention is that the primary document should only contain the essential, 'need to know' information (described in this information sheet under Default insurance cover and Optional insurance cover). We acknowledge that there may be other compulsory disclosure requirements that apply under the relevant insurance legislation. This information may be incorporated by reference: see section 1013C(1A) as inserted by Schedule 10A, Part 5B.

We also understand that there may be a number of different insurance offerings from which members may need to choose. In these circumstances, it is up to the issuer of the superannuation product to determine the essential information that must be provided in the primary document and to incorporate by reference any other relevant information.

Default insurance cover

If insurance cover is provided by default, the primary document must include:

• a summary of the level and type of cover, the cost of the insurance and how a person can decline, cancel or change the cover
• a warning that unless the person declines or cancels the cover, its cost will be deducted from their account or contributions (as applicable): see Schedule 10D, clause 10(3).

Information about eligibility and any conditions and exclusions that are applicable to the cover must be included, but it is discretionary whether this information is in the primary document or incorporated by reference: see Schedule 10D, clause 10(3) and (5).

Optional insurance cover

If insurance is provided not by default but as an option, certain information must be provided, but it is discretionary whether this information is in the primary document or incorporated by reference: see Schedule 10D, clause 10(4) and (5).

If insurance is provided as an option, the primary document must include warnings to read information about the insurance such as:

• eligibility for the cover or any conditions and exclusions
• the level and type of cover, the costs or range of costs and any other significant matter: see Schedule 10D, clause 10(6) and (7).

Accumulation and pension interests in the same superannuation fund

Where a superannuation fund has an accumulation division and a pension division, and the superannuation trustee uses a shorter PDS covering both divisions, the PDS should give similar prominence to both accumulation and pension features. If, for example, the shorter PDS focuses more on accumulation than pension features, consumers may not have enough information to make informed decisions about the pension part of the product.

Standard risk measure

In July 2011, the Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council (FSC) announced new industry guidelines to standardise the disclosure of investment risk in superannuation funds.

The standard risk measure (SRM) is an investment risk classification system developed by the FSC and ASFA to enable investors to compare investment options across superannuation funds. The SRM contains seven risk levels ranging from 'very low' to 'very high', with each level based on the estimated number of negative annual returns over any 20-year period. For example, a very low risk investment option means less than 0.5 negative annual returns in a 20-year period, while a very high risk option means six or more negative annual returns in a 20-year period.

Note: For more information, see Standard risk measure: Guidance paper for trustees, issued by the FSC and ASFA in July 2011.

We encourage superannuation trustees to include the SRM for their default option in the primary document under the heading 'Risks of super', as far as practicable. We also encourage trustees to include all other components of the SRM – such as the explanation of what it is, its limitations and the methodology – in the material incorporated by reference for a superannuation product.

Funds that do not use the SRM should explain in the primary document why they are not using this model and describe what risk classification model has been used instead. If trustees want to add other information about risk in the material incorporated by reference, they can do so: see Schedule 10D, clause 6(4).

Superannuation trustees should be aware that MySuper products are required to have a product dashboard publicly available on the fund's website. The product dashboard requires the use of the SRM as one of its key elements: see section 1017BA, regulation 7.9.07V and the Australian Prudential Regulation Authority's Reporting Form SRF 700.0 Product dashboard. We think this provides a further reason to include the SRM in the PDS.

Where can I get more information?

For more information, see:

• ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070
• ASIC Corporations (Shorter PDS and Delivery of Accessible Financial Products Disclosure by Platform Operators and Superannuation Trustees) Instrument 2022/497
• Class Order [CO 14/1252] Technical modifications to Schedule 10 of the Corporations Regulations

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.