Super funds warned on member best interest

Superannuation funds have been placed on notice that they need to adopt a higher duty to member best interests when shifting member balances into eligible rollover funds (ERFs).

At the same time, the Australian Prudential Regulation Authority (APRA) has raised questions about the ongoing viability of ERFs under the terms of the Government’s Protecting Your Super Package (PYSP) legislation.

The viability of ERFs has been raised in the context of the legislative package imposing a three per cent fee cap on member account balances below $6,000, prohibiting exit fees and limiting the provision of insurance on inactive accounts as well as the sweeping of low balance accounts to the Australian Taxation Office (ATO) for the purpose of reunifying accounts.

APRA has written to superannuation fund trustees warning them of the need to review their policies governing the transfer of accounts to ERFs and the need to take member best interests into account.

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The letter said APRA had also written specifically to RSE licensees authorised to provide an ERF on the implications of the fee caps and the ATO account sweep on the future viability of ERFs, and the capacity of RSE licensees of ERFs to meet their fiduciary duties to members.

 “We expect all RSE licensees to review their policies governing the transfer of accounts to ERFs and determine whether these policies remain in the best interest of members,” the APRA letter said.

“We further expect that in undertaking any account transfers, including successor fund transfers, RSE licensees consider the implications of these transfers for the ATO account sweep under the PYSP reforms to ensure that account consolidation is not averted or delayed, contrary to the best interest of members,” it said.