Superannuation funds and management investment schemes have received a deadline extension to 1 July 2015 for compliance with fee and cost disclosure requirements.
The Australian Securities and Investments Commission (ASIC) came out with Information Sheet 197 ‘Fee and cost disclosure requirements for superannuation trustees' ahead of Stronger Super from 1 July.
"ASIC will take a measured approach where inadvertent breaches arise or system changes are underway, provided that industry participants are making reasonable efforts to comply," the regulator said.
ASIC said a superannuation trustee must include a fees and costs table for each MySuper and Choice product in the product disclosure statement (PDS).
This includes both shorter PDSs prepared under Sch 10D to the Corporations Regulations and long form PDSs that meet the fee and cost disclosure conditions in Sch 10 to the Corporations Regulations.
The fees and costs tables for each MySuper and Choice product must consist of the investment fee, administration fee, buy-sell spread, switching fee, exit fee, indirect cost ratio, advice fees relating to all members investing in MySuper products or investment options, and other fees and costs.
All except other fees and costs are defined in s29V of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Trustees should note the new definition of investment fee for super products now includes performance fees.
ASIC defines indirect costs as "any amount that the trustee knows, or reasonably ought to know, will directly or indirectly reduce the return on investment of a member, where this amount is not charged to the member as a fee".
ASIC also said while intra-fund advice is often included into the administration fee, but s29V (8) of the SIS Act says intra-fund advice can be charged as something else, like an administration or investment fee.
To that end, intra-fund advice will need to be disclosed as an administration fee in the template.
Some funds may calculate performance fees based on the previous year's performance but ASIC views this as misleading because it assumes the previous performance will be repeated.
"Our expectation is that trustees will not simply reflect past performance fees for future years, but will make assumption-based estimates of future performance fees, which allow for meaningful comparison between superannuation funds," ASIC said.
