Super news for March 2021

Super caps to rise

Both the concessional contribution and non-concessional superannuation contribution limits will increase on 1 July 2021, following the release of the Average Weekly Ordinary Times Earnings (AWOTE) for the December quarter. The concessional limit is indexed in $2500 increments, which will see that cap rise to $27,500 and the non-concessional limit increase to $110,000.

The maximum non-concessional contribution somebody who was 65 at the beginning of a financial year can contribute under the bring-forward rule will also rise to $330,000 or three times the non-concessional limit.

In addition, in line with the increase in the transfer balance cap, the limit on how much you can have in superannuation and still be able to make a non-concessional contribution will increase from $1.6 million to $1.7 million. Individuals with a total super balance of $1.7 million or more will also not be eligible for the bring-forward arrangements from 1 July 2021.

The limit on whether or not you are entitled to a co-contribution will increase to $1.7 million on 1 July 2021, as will the limit on whether or not you can claim a tax offset for superannuation contributions on behalf of your spouse.

ASIC commences civil proceedings against REST and Statewide

The Australian Securities and Investments Commission (ASIC) has commenced civil proceedings in the Federal Court against two superannuation funds for different matters.

In the first case, ASIC is alleging the Retail Employees Superannuation Trust (REST) made false or misleading representations about the ability of its members to transfer their superannuation out of REST.

“ASIC alleges that, from at least 2 March 2015 to 2 May 2018, REST made representations that discouraged, and in many cases delayed or prevented, members from transferring some or all of their funds to another superannuation fund,” the regulator said in a statement.

ASIC further alleged that this resulted in REST’s funds under management being higher than they otherwise would have been and members were denied their rights to superannuation portability, suffering financial loss as a result.

In the other case, ASIC has commenced proceedings against Statewide Superannuation for false or misleading representations made about the insurance cover in the fund. ASIC alleges that Statewide sent annual statements and warning letters to approximately 12,500 members suggesting they held insurance cover when they did not. The regulator also alleges that Statewide deducted monthly insurance premiums from some members’ accounts when those members were not covered.

APRA wants super funds to lift their game on insurance

The Australian Prudential Regulation Authority (APRA) is also concerned about the insurance cover that superannuation funds provide to members and has written to life insurers and registrable superannuation entity (RSE) licensees about some issues and trends in the provision of insurance to members.

APRA says it noted a deterioration in group life insurance claims experienced in 2019 and 2020. It is concerned that if these trends continue, members may be affected by either a large increase in insurance premiums or a reduction in the quality of life insurance offered through super.

The regulator is calling on superannuation trustees to provide appropriate data to insurers to enable them to facilitate sustainable pricing; for them to appropriately consider members needs when considering insurance strategies; and for proper tender processes that provide sufficient information and time to all parties.

“It’s critical that these issues are addressed so sustainable and affordable insurance is available to members through their superannuation fund over the medium to long term,” APRA deputy chair Helen Rowell said.

QSuper and Sunsuper merger update

QSuper and Sunsuper announced they had signed a Heads of Agreement to merge and create a $200 billion superannuation fund, servicing two million members that will be open to all Australians. The merger is planned to proceed from September 2021

Bernard Reilly, currently CEO of Sunsuper will be the CEO of the merged fund and QSuper’s CEO, Michael Pennisi will step down.

Currently QSuper has funds under administration of $120 billion and 600,000 members, while. Sunsuper has funds under management of more than $80 billion and 1.4 million members.

Toyota Super to merge into Equipsuper

In other merger news, Toyota Super has announced it will merge into Equipsuper. The addition of Toyota Super’s $860 million in funds under management will build on the joint venture that Equipsuper has with Catholic Super. The combined entities will have a total of $28 billion in funds under management.

“The requirements for running a stand-alone corporate superannuation fund are becoming increasingly difficult, largely due to complex and changing superannuation regulations. We are confident this move can provide even better member outcomes,” Toyota Super chair Rob Purcell said.

Separately, Equipsuper announced that BOC Super will also merge members’ benefits into the fund under a successor fund transfer arrangement.

Under the arrangement, BOC Limited has confirmed that it will continue superannuation contributions for employee members of up to 13%, as well as meeting the cost of standard insurance and administration. BOC Super cited similar reasons as to Toyota Super for the merger, mainly around an increasingly complex regulatory environment.

Aware Super and Victorian Independent Schools Superannuation Fund discuss merger

The Victorian Independent Schools Superannuation Fund (VISSF) and Aware Super have signed a Memorandum of Understanding (MoU) to explore the benefits of a potential merger. The two funds will now undertake due diligence to ensure such a merger is in their members’ best interests.

“Through this potential merger, we hope to continue to build on VISSF’s incredible legacy and increase Aware Super’s scale in the key sectors that we serve including education, health, emergency services and other industries that support our community, and pass on those scale benefits to our members,” said Aware Super chief executive officer Deanne Stewart.

Aware Super currently has $140 billion in funds under management, while VISSF has approximately $700 million in funds under management.

“VISSF is committed to continually looking for ways to achieve even better outcomes for our members. So, we have chosen to take a proactive approach by considering how we can attain the benefits that size and scale bring, with the right merger partner,” said VISSF chairman Peter Sharples.

Costs rise for retirees

The Association of Superannuation Funds of Australia (ASFA) Retirement Standard numbers for the December quarter have revealed that couples aged approximately 65 need to spend $62,562 per year and singles $44,224 to live a comfortable retirement. Both those figures have risen by 0.9% on the previous quarter.

Increases in health insurance premiums over the quarter – of about 3% for many retirees – were a big contributor to the overall increases. ASFA points out that there are now 2.2 million Australians aged over 65 with private health insurance, compared to 2 million three years ago.

“As a greater number of people ventured out of their homes in search of a meal out or a domestic holiday, we saw price rises in those areas, which is not altogether favourable for retirees on a budget,” ASFA deputy CEO, Glen McCrea, said.

The price of domestic travel and accommodation rose by 6.3% over the quarter while the price of meals and takeaway food rose by 1.1%.

Three strikes and you’re out for SMSF annual returns

At the recent Self-managed Superannuation Association National Conference, Australian Taxation Office assistant commissioner Justin Micale issued a warning to SMSF trustees that have not completed their annual returns.

“Another area of concern for us is the non-lodgement population,” he said.

“To give you some context, even with the due date for the lodgement of the 2019 SMSF annual returns being deferred until 30 June 2020, we are tracking at around an 86% lodgement rate. This means that there are still around 80,000 funds yet to lodge their SAR.”

If a return is overdue by more than two weeks, and a lodgement deferral hasn’t been received, the fund’s status will be changed to ‘Regulation details removed’. That means that employers cannot make super guarantee contributions for the SMSF members.

In addition, the ATO is sending a series of letters to non-lodging SMSFs under a ‘three strikes and you’re out’ approach.

An initial blue letter will let them know they are required to take action then, if no response is received, trustees will receive an orange letter warning of the potential consequences – including penalties, a notice of non-compliance or disqualification of trustees.

“If we still don’t get a response we issue our final red letter, basically a show cause letter instructing the client to tell us why they shouldn’t be subject to any of the consequences as outlined in the previous letter,” Micale said.

AMP Capital offloads some investment management capabilities

AMP has announced that it has entered into a non-binding heads of agreement with Ares Management Corporation for Ares to acquire 60% of AMP Capital’s private markets business (which includes infrastructure equity and debt, real estate and other minority investments). AMP would retain 40% ownership.

“We believe the proposed partnership with Ares would deliver strong outcomes for our clients, our shareholders and our broader business,” AMP chair Debra Hazelton and AMP chief executive Francesco De Ferrari said in a statement.

“We expect it would strengthen the business and significantly accelerate our strategy to grow private markets, while de-risking our international expansion plans, and bringing forward the value in AMP Capital for our shareholders.”

Ares is to acquire its 60% for $1.35 billion, while AMP returns its share worth $0.9 billion.

AMP Capital has also reached an agreement with Canada-based global investment manager Fiera Capital to acquire its global companies capability. The agreement includes the investment team and the Global Companies Fund (GCF) UCITS platform series.

The GCF has assets under management of more than US$500 million and the transfer is subject to regulatory and other approvals.

“This agreement delivers on AMP Capital’s strategy to find the best opportunities for our Global Equities and Fixed Income (GEFI) capabilities to achieve scale and accelerate growth,” AMP Capital Global head of public markets, Simon Warner, said. 

In other AMP news, the company’s annual report revealed that Boe Pahari, who was chief executive of AMP Capital from 1 July 2020 to 23 August 2020 before his position became untenable due to sexual harassment allegations, was paid $376,000 for that period plus a $937,724 bonus.

“While a zero STI outcome was awarded to Mr Pahari for his role as KMP, he remained eligible to participate in the AMP Capital Enterprise Profit Share (EPS) plan in his capacity as Global Head of Infrastructure Equity and the Northwest region. For this role, consistent with prior years, he received a payment awarded under the AMP Capital EPS plan. The pro-rated amount of the EPS award was $937,724 for the time during which he was the Chief Executive, AMP Capital,” the annual report said.