A RECENT inquiry by the Australian Securities and Investments Commission has found that at least 5,000 Australians have ‘old style’ or ‘legacy’ superannuation accounts that might be subject to significant exit fees if they try to move their money out of these funds.
Many of these products were bought from life insurance companies in the 1980s and 1990s before the introduction of compulsory superannuation in 1993 and are not now open to new members.
Under the contracts governing a lot of these products, the exit fee doesn’t expire until the account holder reaches retirement age or achieves a target account balance. While this is consistent with the original terms of those contracts, ASIC sees it as an important matter for consideration.
ASIC recommends that people whose superannuation accounts might be affected by these exit fees should check with their fund before making any decision to stop, renew or top-up contributions, or to withdraw money.
The legacy funds that ASIC spoke to advised that the long-expiry exit fees were largely designed to recover money that was paid out by the product providers in commissions to agents and advisers who sold the products.
The money is recovered, either through exit fees or, if the member stays in the product, through ongoing fees.
These funds generally won’t waive exit fees on request. However, some funds have told ASIC that they offer solutions that can reduce the impact of exit fees on members’ superannuation balances, including:
• migrating their legacy product into newer style superannuation products with short-expiry fees and other features;
• allowing members to withdraw some of their money without incurring an exit fee if they leave some money in the fund until expiry and
• encouraging members to keep contributing by providing new features or other incentives.
ASIC’s Super Decisions brochure has more information about what you should consider when making decisions about your superannuation. It is available from ASIC’s consumer website www.fido.gov.au
ASIC seeks better disclosure for shareholders in related part transactions
THE Australian Securities and Investments Commission has commended Australian public companies for improving the quality of disclosures about related party benefits in disclosure documents, but warned that a number of common defects continue to regularly recur.
The findings arose from ASIC’s campaign to identify areas where companies were failing to provide shareholders with all the information they needed in deciding whether it was in the company’s best interests to grant a financial benefit to a related party.
Shareholder approval is required when a public company provides financial benefits to a person or group that are not at ‘arm’s length’ from the company.
During the three month period between September and November 2004, ASIC reviewed a total of 223 notices of meeting and accompanying documents, including re-lodged notices of meeting. From this analysis, 58 notices of meeting were found to have common defects. As a result:
• 50 notices were withdrawn and subsequently re-lodged once the common defects has been rectified;
• five notices were withdrawn and not re-lodged;
• three required further regulatory action;
• one comment letter was issued; and
• in one case where the company had already sent the related part documents to shareholders prior to the lapse of the statutory 14 day period, ASIC obtained an undertaking from the company that it would withdraw the relevant resolution from shareholder consideration.