Cth Draft for Faith-Based Superannuation Products Open for Consultation
Monday 25 July 2022 @ 4.24 p.m. | Legal Research
On 20 July, the Federal Treasury published the Draft Treasury Laws Amendment (Measures for a later sitting) Bill 2022: Faith-based products (Cth) (‘Draft Bill’) and its Explanatory Memorandum for public consultation.
Consultation on the Draft Bill is currently open, please refer to the Federal Treasury site for further details.
Rationale
Current Minister for Financial Services Stephen Jones made an election promise in a December 2021 media release, stating that:
“If elected a Labor Government will allow APRA to take into account the religious affiliation of a super fund when applying the recently-introduced performance benchmark. Labor believes super funds must be required to deliver the highest possible returns to members, thereby ensuring the biggest possible account balance at retirement. We also believe in a diverse superannuation market that allows Australians to make choices about how their money is invested.”
What is a “faith-based product”?
The Draft Bill proposes amendments that would allow APRA powers to determine that a product is a faith-based product if a trustee can provide a valid application to this effect.
The Draft Bill's Explanatory Memorandum summarises:
"In order to be a valid, an application must be in writing and in the approved form, and must contain:
- certification from the trustee(s) that the product uses a faith-based investment strategy and that this is disclosed in its regulated disclosures and marketing materials;
- one or more indices which APRA could use to assess the product’s performance; and
- any other information prescribed by the regulations or legislative instrument."
Trustees that are successful in their application would also be subject to an additional obligation, where they must provide APRA with declarations of the following, as soon as practicable:
- the product’s investment strategy, as in line with its faith-based principles;
- disclosure requirements as had complied with; and
- the product’s index (or indices) performance measures.
The Proposed Supplementary Performance Test for Faith-Based Products
The Draft Bill's Explanatory Memorandum notes that:
"Under the existing Part 6A framework, if a product fails the performance test, a number of consequences will apply for APRA and trustees. These include:
- APRA must publish the fail result on a website maintained by APRA (see section 60C(5) of the SIS Act);
- trustees must notify beneficiaries of the fail result using a notification letter prescribed by regulations (see section 60E of the SIS Act); and
- for two consecutive fail results, trustees are prohibited from accepting new beneficiaries into the relevant product (see section 60F of the SIS Act)."
The Draft Bill proposes to establish a supplementary performance test for faith-based products, which will allow the faith-based principles to be taken into account when assessing the performance of a product against benchmarks.
The Draft Bill proposes that if a faith-based product fails the original performance test, APRA would then be required to assess the product against the supplementary test. If the faith-based product then proceeds to fail the supplementary test, the consequences set out in the existing performance test framework would then apply.
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Sources:
[Draft] Treasury Laws Amendment (Measure for a later sitting) Bill 2022: Faith-based products (Cth) and explanatory memorandum available from TimeBase's Lawone website
