The Cooper Review recommendations
The final Cooper report includes 177 recommendations across the ten recommendation packages, which are the issues that the Panel believes will generate the greatest benefit for members and the superannuation industry. The Panel also believes that there is second tranche of issues that should be considered that could also benefit members. The Panel has not provided a detailed list of these secondary issues.
The main recommendations are:
- The development of a new regulatory regime that focuses on the nature of the members in a fund. This approach is referred to as ‘the choice architecture model’. Members would be classified into three main types - MySuper, choice or SMSF members. The nature of the members in a fund will then determine the applicable levels of governance, regulation and member protection
- The introduction of MySuper as a standard default option for employees/members. Certain criteria must be met before an offering can be a MySuper offering. MySuper should be a simple, cost-effective offering with a diversified portfolio of investments without offering investment choices to the MySuper members. It should also offer the members access to retirement pensions
- The current trustee covenants/duties included in the SIS legislation should be expanded and split into between trustee-director duties and collective trustee duties. A code of trustee governance should be developed, similar to that developed by the ASX Corporate Governance Council. Limitations should apply to the number of board positions that a person can hold unless APRA is notified that there is no reasonably foreseeable conflict
- When developing and implementing a fund’s investment strategy, a number of additional factors should be taken into consideration, including expected costs, taxation and the availability of valuation information
- Additional reporting requirements should be introduced to overlay the current accounting requirements. These “outcomes reporting standards” should provide consistency in the information provided by funds and should cover investment performance and costs at investment option levels, measures for uncertainty/volatility of investment returns, product dashboards, trustee costs, and so on. Other additional measurement standards should be implemented. Reporting information should be readily available on the fund’s website. MySuper benchmarking surveys should also be conducted
- Administrators and commercial clearing houses should be licensed. Additional licensing conditions should be imposed on funds with internal administration systems
- New capital requirements should be introduced and phased in
- Steps should be taken to introduce systems to streamline various superannuation processing/data exchange arrangements (referred to as SuperStream). Tax file numbers should be used as primary member identifiers, e-commerce should be used as much as possible and penalties should be imposed on employers for not providing data requirements
- APRA should have general standards-making powers and the regulators should work closely together to implement the Cooper recommendations. The ATO should be able to issue binding SIS rulings for self-managed super funds (SMSFs)
- Non-intra fund advice should not be bundled advice to members and employers. Such advice should be available on request and associated costs deducted from the member’s account only with the member’s written consent. Members should not bear the costs (either directly or indirectly) of any services/advice provided to employers and there should not be any product-based up-front or trailing commissions on services/advice provided to members. This is regardless of whether the member is a MySuper member or choice member
- Self-managed super funds should continue in their current form. The instalment warrants borrowing standards should be reviewed in two years to determine whether they are still appropriate. SMSFs should not be able to invest in in-house assets or collectibles. The ATO should collect SMSF data and publish SMSF statistics. Sliding scale penalties should also be introduced for non-compliance issues.
Importantly, the Cooper Review has recommended a number of reviews be undertaken by the Productivity Commission to assess the implementation of various aspects of the Cooper recommendations if they are accepted and implemented by the Government.