Introduced in 1993, the Act was written to regulate the newly established super industry – while the Superannuation Guarantee came into effect on 1 July 1992, it only legislated for the payments made by employers. The SIS Act on the other hand, created an operative framework for superannuation funds – the trusts that employers make Superannuation Guarantee payments to.
What does the SIS Act do?
The original SIS Act legislation states that its purpose is “to make provision for the prudent management of certain superannuation funds, approved deposit funds and pooled superannuation trusts and for their supervision by APRA, ASIC and the Commissioner of Taxation”.
The SIS Act can be read in full here, but these are some of the key parts of the act.
Licensing of trustees
Part 2A of the Act sets out provisions for the granting of RSE (registrable superannuation entity) licenses. A trustee is required to have an RSE licence in order to operate a super fund, and there are two basic classes of RSE licence:
- One for public offer entities (e.g. any super fund which offers, or intends to offer superannuation products to the public on a commercial basis)
- One for any RSE that is not a public offer entity (e.g. corporate funds and certain industry funds)
The act specifies that only certain bodies may apply for certain RSE licence classes. While a constitutional corporation (any trading or financial corporation) can apply for an RSE licence of any class, while body corporates and groups of individual trustees may not apply for an RSE licence that allows them to be trustees of a public offer entity.
When it comes to whether or not the applicant is actually granted the license they’ve applied for, the Act essentially says that the Australian Prudential Regulation Authority (APRA) must grant them a license if they have no reason to believe that the applicant would fail to comply with the relevant laws and prudential standards.
If a trustee is granted an RSE licence, they may then proceed to apply for registration of their registrable superannuation entity.
The following table contains details of the superannuation funds rated by Canstar. This table has been sorted by one-year performance (highest to lowest).
Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.
Canstar considers the annual investment returns of a product’s default investment option, including default life-stage options. Where a product does not have a default investment option, annual returns for the investment option with the highest FUM and a 60-80% growth asset allocation are used.
Operating and prudential standards for super funds and their trustees
Part 3 of The Act laid out a system of prescribed standards which apply to both:
- regulated superannuation funds, approved deposit funds and pooled superannuation trusts
- the trustees and RSE licensees of those funds and trusts
The set of standards covers a range of things including, but not limited to:
- who’s allowed to contribute to funds
- the amount of money a fund is allowed to accept
- the circumstances in which a fund is allowed to accept money
- the level of benefits and assets that a fund is allowed to provide and hold respectively
Trustees must ensure that they and their RSE are compliant with the operating standards outlined in Part 3 at all times. Additionally, Part 3 specifies that RSEs and their trustees must comply with a stringent set of prudential standards, however said standards are decided and overseen by APRA, and not contained in the Act itself.
Part 11A of the Act outlines what kinds of fees trustees and RSEs are and aren’t allowed to charge. The main points from Part 11A are:
- entry fees are not permitted
- buy-sell spreads, switching fees, and exit fees must be charged only on a cost-recovery basis
- the cost of advice given to employers must not be passed onto members
- the cost of any advice given to a member must not be borne by any other members
Part 11A does not apply to self-managed super funds (SMSFs).
Announced in 2011 and launched in 2013, regulations overseeing MySuper products were added to the SIS Act as Part 2C of the Act. According to Part 2C:
- all MySuper products must be “simple products, sharing common characteristics”
- RSE licensees must obtain permission from APRA in order to offer a MySuper product through their RSE
Additionally, a MySuper product must:
- adopt a single diversified investment strategy
- offer the exact same options, benefits, and facilities to all of its members
- attribute amounts to members in relation to their beneficial interest in the fund, in a way that does not stream gains or losses to only certain members of the funds
For an exhaustive list of regulations concerning MySuper products, check Part 2C of the SIS Act.
Making sure you’re with a super fund that suits your personal circumstances is an important part of planning for your retirement. You can compare super funds and find the best-value product for you with Canstar.