Super news for December 2024

Legacy pension restrictions removed

At long last, SMSF members can now exit legacy pensions after proposed changes were given royal assent.

The Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024 were approved by the Governor General on 5 December.

From 7 December, legacy pension holders have five years within which to commute a lifetime, life expectancy and market-linked income stream started before 20 September 2007. Once commuted (stopped), they can move these pension amounts to cash, an accumulation account or start a new account-based pension.

Limitations on pension reserves have also been lifted. Those that support an income stream that no longer exists and are still allocated to the pension recipient will be exempt from the concessional and non-concessional contribution caps.

Super retirement reforms on the way

The Government has announced a package of reforms designed to improve the retirement phase of superannuation. The package is in response to feedback received from the Superannuation in Retirement consultation.

Assistant treasurer and minister for financial services Stephen Jones said the reforms focus on four key areas:

• Enhanced independent guidance
• Better retirement products
• Best practice principles
• Increased transparency.

“By improving the innovative income stream regulations, the reforms will support innovation in quality retirement products, giving members more options that meet their needs and helping them make the most of their super. The updated regulations will commence from 1 July 2026, with consultation on draft regulations ahead of this,” Jones said in a release.

The changes will allow funds to offer product features such as money back guarantees, and instalment payments instead of an upfront lump sum.

With regards to enhanced independent guidance, Jones said the government will expand and refresh resources on the Moneysmart website, enabling access to independent, reliable information on superannuation and retirement options.

“ASIC will lead a consumer education campaign to raise awareness among people approaching retirement and in retirement. New resources will start rolling out in the first half of 2025,” he said.

National strategic plan needed for retirement income

The Association of Superannuation Funds of Australia (ASFA) has called for the Federal Government to develop a national retirement income strategy.

At its recent annual national conference, ASFA said a strategy is needed to guide the primary purpose of the retirement income system and set a long-term vision for what life after work might look like. 

“Australia’s successful superannuation system has come to be seen as the cornerstone of retirement income. In order to provide the best outcomes for Australians, we need to build a better understanding of interface between super, the pension and private savings, and what that means for Australians in retirement,” ASFA chief executive officer Mary Delahunty said.   

ASFA wants the government to lead a process that would include a broad range of stakeholders representing Australians of various ages, relevant sector bodies within super, and broader employer and employee organisations. 

“National strategic plans are comprehensive documents developed by governments to outline the vision, long-term goals and priorities for addressing critical issues affecting our nation,” Delahunty said.

“We have seen these tools play a critical role in advancing the national conversation on disability, homelessness and ageing, and the time is right to bring this type of planning to our retirement income system,” she added.

Stop abusers  inheriting their victim’s super

A Parliamentary Joint Inquiry into Financial Abuse has recommended law changes that would stop abusers from being able to inherit their victim’s super. The members of the Parliamentary Joint Committee on Corporations and Financial Services adopted the 61 recommendations of the report unanimously.

Recommendation 10 explicitly called for a change to the Superannuation Industry (Supervision) Act 1993 as outlined below.

That the Superannuation Industry (Supervision) Act 1993 be amended to provide a mechanism so that a beneficiary who has perpetrated domestic or family abuse, including financial abuse, and domestic violence related suicide, against the superannuation account holder can be declared an invalid beneficiary of the account holder’s superannuation death benefits.

“The Public Trustees of Australia pointed out that victims of financial abuse within self-managed superannuation funds face severe disadvantages, as these funds are not covered by the Australian Financial Complaints Authority,” chair of the committee, Senator Deborah O’Neill said in the chair’s forward to the report.

“Super Consumers Australia also noted the shortcomings of the superannuation death benefit system, which often works against the interests of victim-survivors of financial abuse and domestic violence. Something is very wrong when the perpetrators of economic abuse receive their victim’s superannuation earnings,” she added.

Super Members Council CEO Misha Schubert said a perpetrator getting their victim’s super death benefit was an extension of the abuse, and thanked senators for hearing key evidence from the sector and advocates recommending the reform that would stop this.

“The sector is united in calling for reform and sending a clear message that abuse is not tolerated in any form. We strongly support Government and Parliament moving to close this legal loophole and protect victims of family violence and financial abuse,” she said.

Super funds’ death benefit claims handling put on notice

In the wake of its legal action against the Construction and Building Unions Superannuation Fund (Cbus) for its poor handling of death benefit and TPD claims, the Australian Securities and Investment Commission (ASIC) has put chief executives of super trustees on notice, urging them to assess their death benefit claims handling practices.

ASIC said in an open letter that trustees should have consumer-focused performance objectives for handling death benefit claims, covering the performance of all aspects of the process undertaken by the trustee as well as any outsourced to service providers and reflect the reasonable expectations of claimants.

ASIC will be issuing a public report in early 2025, with detailed insights from a completed review of these practices.

The letter ended with five requests for super funds which included sharing the letter with the board and reviewing internal dispute resolution data to identify potential frictions or areas for improvement in death benefit claims handling processes.

High pass rate for financial adviser exam

More than 220 financial advisers passed the financial adviser exam in November, according to the latest statistics from ASIC.

In the November exam cycle 289 people sat the exam with 225 passing and 207 sitting the exam for the first time. The exams are held four times a year.

ASIC says a new financial adviser must pass the exam before starting the third quarter of their professional year and be authorised by an Australian financial services (AFS) licensee as a ‘provisional financial adviser’.

Unsuccessful candidates receive general feedback from the Australian Council for Educational Research on the areas they underperformed in.

To date, 21,637 individual candidates have sat the exam and 92% of candidates have passed.

Super assets top $4 trillion

Australia’s total superannuation assets passed the $4 trillion mark in the year to September 2024, an increase of 13.4%, according to the latest data from the Australian Prudential Regulation Authority (APRA).

Total assets in APRA-regulated funds increased 15.1% over the year to $2.8 trillion while total assets in self-managed super funds increased 10.9% to just over $1 trillion.

Total contributions increased by 13.1% over the year to $191.3 billion. Of this, employer contributions increased by 11.4% to $140.8 billion and member contributions increased by 18.1% to $50.5 billion.

Benefit payments also increased, by 11.4% to $119.9 billion in the year ending in September 2024. Lump sum payments rose by 4.9% to $65.1 billion and pension payments increased by 20.3% to $54.8 billion.