Topic Paper 7 - Fees and Costs Disclosed

About this paper   

This paper (Topic Paper 7) provides detail on draft “Reporting Standard SRS 706.0 Fees and Costs Disclosed" (SRS 706.0).

The Superannuation Data Transformation (SDT) project is a key pillar in delivering APRA’s strategic focus on improving member outcomes. APRA’s heat maps and other analysis indicates that there is significant scope for superannuation industry fees and costs to reduce. More granular fees and costs data will enable Registerable Superannuation Entity (RSE) licensees and APRA to focus in on where change is most needed.

Data required by draft SRS 706.0 will expand fees and cost disclosures to choice products and options and provide enhanced information on key forward-looking drivers of member outcomes for all superannuation products. The enhanced data collection will also collect updated fees and cost data to ensure that the upcoming changes to ASIC’s “Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements” (RG 97) are appropriately captured.

Topic Paper 7 provides details of the proposed changes to reporting requirements regarding fees and costs disclosed including:

• objectives of the proposed changes;
• the current state;
• drivers for change;
• the proposed state; and
• specific areas of the proposals that APRA is requesting feedback on.

The proposals in this paper should be read in conjunction with the Discussion Paper “Superannuation Data Transformation Phase 1”¹ released on 7 November 2019 and draft reporting standard SRS 706.0.  Reference should also be made to “Topic Paper 2 – Performance” and draft reporting standards “SRS 705.0 Components of Net Return” (SRS 705.0).  A summary of the key changes proposed to reporting on fees and costs disclosed is provided in Appendix 1.

APRA recognises the impact that COVID-19 is having on the superannuation industry. However, the proposals outlined in this paper are critical as they will ensure that the gaps in the current data collection are addressed.

Recognising the impact of COVID-19, in addition to undertaking a formal submission process (refer below), APRA will adopt a flexible approach to consultation to help facilitate stakeholder feedback. This will include: 

• consolidated feedback through respective industry bodies; 
• roundtable discussions and forums; 
• webinars; and 
• bilateral meetings.

APRA will also undertake a voluntary pilot collection of the data set out in draft SRS 706.0. While the pilot data collection is voluntary, APRA considers the process of working through the data collection is an essential component of the consultation as it will enable RSE licensees to provide comprehensive feedback on proposed changes.

Formal written submissions for Topic Paper 7 close on 13 November 2020.

Footnotes:

¹https://www.apra.gov.au/discussion-paper-superannuation-data-transformation-phase-1 

Chapter 1. Introduction

1.1 Background

Over the last decade, the superannuation industry has grown in size and importance in the Australian economy, with total assets of superannuation entities increasing from $1.1 trillion to $2.9 trillion. The evolution of the superannuation system has been accompanied by continued consolidation of RSE licensees and RSEs, with large and more complex entities managing the retirement benefits of most Australians. In this context it is critical that regulators and other stakeholders have access to data that appropriately reflects the size, nature and complexity of the industry.

Access to data of sufficient breadth and depth is essential to adequately assess all aspects of the superannuation industry’s operations and the progress of RSE licensees in improving outcomes for members.

To ensure the superannuation reporting framework is fit for purpose the (SDT) project seeks to improve the breadth of the data collection in Phase 1, with the depth of the data collection to be improved in Phase 2. Phase 3 of the SDT project will refine the quality and consistency of data reported in the first two phases.

1.2 Drivers for change

The key drivers for change through the SDT project are outlined in the November 2019 Discussion Paper. Key objectives include improved accountability of the industry and more informed analysis and assessment of the performance of the superannuation industry by stakeholders.

For Topic Paper 7, the key driver is the gap in the current reporting framework with regards to fees and costs for all superannuation products, as only MySuper products are currently captured. Without data to facilitate forward looking assessments of fees and costs across all products, including costs associated with accessing products, it is not possible to make appropriate comparisons and fully assess member outcomes. 

Phase 1, for which this topic paper has been prepared, will seek to address current data gaps in the reporting framework. By addressing these gaps, APRA, the industry and other stakeholders will be able to appropriately assess member outcomes, industry operations and performance. 

Improvements to the reporting framework seek to facilitate and support a competitive, transparent, well-governed, resilient and efficient superannuation industry comprised of RSE licensees able to deliver quality outcomes for members to and for their retirement.

1.3 Objectives of the proposed changes

APRA is seeking to:

• gain a more complete picture of the fees and costs reported in Product Disclosure Statements (PDSs); 
• facilitate the comparison and assessment of fees and costs for superannuation products, investment options and investment menus; and
• expand the publication of fees and costs for all superannuation products.

Chapter 2. Fees and Costs Disclosed

Through draft SRS 706.0, APRA proposes to collect information about fees and costs which are disclosed in the PDS for each superannuation product.  This includes all permissible fees charged to MySuper and choice members and will facilitate more accurate, consistent and efficient comparisons of fees and costs across superannuation products. APRA also intends to provide greater transparency through publication of the data collected.

The reporting of fees and costs is currently² aligned with ASIC’s “Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements” (RG 97), which was released in March 2017. However, ASIC has recently released an updated version of RG97, which will commence on 1 July 2020 with transitional arrangements applying to enable RSE licensees to opt into the updated version until 30 September 2022. To address the changing status, draft SRS 706.0 will allow reporting on the basis of both the current and updated version of RG97 until RG97 is fully implemented.

As with existing collection SRF 703, it is proposed to collect the data under draft SRS 706.0 on an annual basis as at 30 June and on an ad hoc basis when changes to fees and costs are made. The due date will be aligned with timeframes that apply for other ad hoc and annual collections.

2.1 Fee disclosures

MySuper products

Existing requirements

Currently, data items related to fee and cost disclosures are collected at the MySuper product and lifecycle option level.  The data reported under these reporting standards enable legislative requirements for APRA’s publication of MySuper data to be met.

The objective of the current suite of reporting standards is to provide information relating to:

• The product dashboard of each MySuper product. A key item reported is the ‘statement of fees and other costs’, which is a prospective figure that is the sum of all investment, administration and advice fees and costs³.
   
• The fees and costs required to be disclosed in a PDS relating to a MySuper product.  Under current requirements, the fee types allowed for MySuper products are advice fees, administration fees, investment fees, insurance fees, buy-sell spreads, switching fees, exit fees and activity fees. Investment fee levels for MySuper products with a lifecycle investment strategy are also included.

Proposed changes

APRA proposes to align fee and cost reporting to the updated version of RG97.  Key changes include capturing advice fees and costs under administration fees and costs and aligning categories of fees and costs. Entities will also able to indicate if they are reporting on a pre or post RG 97 implementation basis during the transition period to 30 September 2022.

Non-MySuper products

Existing requirements

Under existing reporting standards, RSE licensees are not required to report fee and cost disclosure data relating to non-MySuper products, investment options and investment menus.

Proposed changes

APRA proposes to extend the reporting of fees, costs and taxes to choice products and options, capturing this data at each of the product, investment option or investment menu levels. These changes also propose to facilitate the reporting of fee tiers and contribution fees.

2.2 Fee discounts and rebates

Existing requirements

Under existing reporting standards, RSE licensees are not required to report fee rebate and discount disclosure data.  

Proposed changes

APRA proposes that each discount arrangement scheme available for MySuper and choice products and options is reported.  The number of employer sponsors, member accounts and customised features available to members will also be required to be reported.

2.3 Activity fees

Existing requirements

Activity fees disclosed are currently disclosed at MySuper product level in item 5, SRS 703.0.

Proposed changes

APRA proposes to extend the reporting of activity fees to choice products and options.

Footnotes:

² In the existing superannuation data collection, data items related to fee and cost disclosures are collected at the MySuper product and lifecycle option level via "SRS 700.0 Product Dashboard", "SRS 702.0 Investment Performance" and "SRS 703.0 Fees Disclosed".

³ The ‘statement of fees and other costs’ is calculated at the representative member level based on estimated fee and cost information annualised for the following year.

Chapter 3. Overlap with current reporting standards

There is an overlap between data to be collected through the proposed SRS 706.0 with data collected under the existing reporting standard SRS 703.0 for MySuper products and lifecycle options.   

APRA will consider granting exemptions from reporting these data items under existing reporting standards or, where relevant, discontinuing collection under an existing reporting standard, to the extent that new reporting standards duplicate data that is already collected. 

Chapter 4. Proposed non-confidentiality determination

APRA’s SDT project will lead to significant changes to reporting requirements for the Superannuation industry.  As a result of these changes, APRA needs to consider whether the data reported under Financial Sector (Collection of Data) Act 2001 (FSCODA) should be determined to be non-confidential and publicly accessible.

APRA is generally able to publish aggregate industry-level data without restriction. To achieve the objectives of the enhanced superannuation data collection, which include improved accountability of the industry and more informed analysis and assessment of the performance of the superannuation industry by stakeholders, it will be necessary to publish data at an individual entity, product and investment option level.

Under section 56 of the Australian Prudential Regulation Authority Act 1998 (APRA Act), data reported to APRA under FSCODA is protected information and generally not able to be disclosed at an entity level, unless APRA determines the data to be non-confidential.
However, section 57 of the APRA Act permits APRA to make a determination that data provided in a particular reporting document, which has been submitted in accordance with a reporting standard made under FSCODA, is non-confidential if it considers the benefit to the public from the disclosure outweighs any detriment to commercial interests that the disclosure may cause.  

FSCODA also requires that APRA must not make such a determination unless it has: 

• given interested parties (bodies or associations representing the relevant kind of financial sector entity) a reasonable opportunity to make representations as to whether information of the kind that is proposed to be released is confidential; and
   
• taken any such representations into account.

APRA proposes to determine under section 57 of the APRA Act that all data under SRS 706.0 is non-confidential.

Data which APRA determines to be non-confidential can, when published, identify individual entities but will not breach the privacy of individual members.  The scope of the proposed publication of data and treatment of privacy protection in public data releases will be set out in the Phase 1 Consultation Response.

Reasons for the proposed determination

The data to be collected under SRS 706.0 will provide essential foundational information to fulfil the objectives of the Superannuation Data Transformation. It will provide necessary forward looking information on fees and costs to enable meaningful assessment of outcomes for members in different products and investment options, ultimately supporting initiatives to improve outcomes for superannuation members.

APRA intends to release initial proposals with regards to publication and sharing of data for the proposed data collection later in 2020.

4.1 Feedback sought on confidentiality proposals

To assist APRA in making its decision about the data to be determined non-confidential, submissions from RSE licensees and other interested parties that seek to have data remain confidential should include specific: 

• details of the data items that should remain confidential;
   
• information on how the disclosure of that information would lead to detriment to member interests, and the extent to which that could occur; and/or 
   
• information on how the disclosure of that information might lead to detriment to RSE licensees or other parties’ commercial interests.

Chapter 5. Consultation questions: Fees and costs

Comment is invited on the proposed reporting changes outlined in this paper, and the draft reporting standard, specifically in the below areas:

Questions

1. What difficulties, if any, may be caused by reporting data items on draft SRS 706.0 that allows reporting on both a current and transitional RG97 implementation basis? How could this be mitigated?
    
2. When do you anticipate that you will complete the transition to the updated RG97 requirements?
    
3. What difficulties, if any, may be caused through reporting fees and costs disclosure at an investment option level and how could they be mitigated? 
    
4. Are there any gaps or areas requiring further clarification?
    
5. Feedback as outlined in item 3.1 Feedback sought on confidentiality proposals. Please ensure feedback is specific on which data items should remain confidential and any detriment to member or commercial interests.

5.1 Submission of responses

Written submissions on Topic Paper 7 should be sent by 13 November 2020, preferably by email to superdatatransformation@apra.gov.au. Alternatively, submissions can be mailed to:

General Manager  
Data Analytics & Insights
Cross-Industry Insights and Data Division  
Australian Prudential Regulation Authority
GPO Box 9836 
SYDNEY NSW 2001

5.2 Submission of pilot data

Through Phase 1 of the SDT project, APRA is seeking to collect pilot data on a voluntary basis to test and inform areas for clarification prior to finalising Phase 1 reporting standards.  As the pilot data is based on draft reporting standards, this data is not collected under the auspices of FSCODA and will be submitted on a best endeavours’ basis. While provision of the pilot data is not mandatory for entities, past experience has indicated that it is difficult for the industry to provide comprehensive feedback on proposed data collections without actually working through the provision of the required data. Therefore we view the pilot collections as a fundamentally important part of the development of an effective and enduring data collection.

Each Topic Paper will be accompanied by draft reporting standards, a reporting template to collect pilot data, specified reporting periods for which RSE licensees are requested to provide data in the template and due dates for submission.

Following the collection and review of the Phase 1 pilot data, an updated data template will be provided to entities for completion to further test and clarify the draft reporting standards.

Following the first data collection after the Phase 1 Reporting Standards have been finalised, APRA intends to publish the data received.  It is intended that the released data will assist RSE licensees in meeting their obligations under SPS 515. It will also inform Phases 2 and 3 of the SDT project.

This table summarises the key features of the initial pilot data collection for this topic paper: 

 Appendix I – Key changes proposed to the reporting of fee and cost disclosures