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Enhanced Fee Disclosure Measures and other regulations


Wednesday, 16 March 2005

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To complement the introduction of Superannuation Choice on 1 July 2005, regulations have been made that standardise the description and calculation methods for fees and costs to allow for easier comparability and understanding of this information in Product Disclosure Statements. These enhanced disclosure measures will also apply to managed investment products one year after the changes are introduced for superannuation.

The measures represent a comprehensive approach to enhancing fee transparency and promoting comparability to help consumers make informed decisions on. The package comprises a set of complementary elements that will promote competition by making it easier for consumers to directly compare fees and costs of rival products.

Amongst other things, the measures will require Product Disclosure Statements for superannuation and managed investment products to include the following components:

  1. A ‘Consumer Advisory Warning Box’ which alerts consumers to the importance of value for money and the compounding value of fees and costs and their impact over time on end benefits;
  2. A ‘Fees and Costs’ template which is a standardised fee table that simplifies the disclosure of fees and costs and allow for more effective comparison across products;
  3. An ‘Additional Explanation of Fees and Costs’ section which will include additional important information about fees and costs; and
  4. An ‘Example of Annual Fees and Costs’ which will provides an illustrative worked example of fees and costs in a balanced investment option for a specified account balance and level of contributions.

The regulations also introduce the concept of an ‘Indirect Cost Ratio’ (ICR) to provide a consistent methodology for the calculation of ‘management costs’ which are not deducted directly from a member’s account. This methodology allows for consistent calculation and apportionment of such amounts between fund members.

Product providers already need to prepare periodic statements that include reporting on fees and costs. The new regulations make these obligations more explicit in a way that is consistent with the description and calculation method for fees and costs in Product Disclosure Statements.

The regulations also contain a number of technical amendments that will refine the operation of certain elements of the Financial Services Reform Act 2001 and promote certainty for industry.

The Regulations (Corporations Amendment Regulation 2005 (No.1) and Explanatory Statement are available on the Comlaw website.

Telephone inquiries should be directed to David Love on (02) 6263 3962.

Documents Available:

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Disclosure of Fees and Costs - Package of Disclosure Measures - 17/06/2004
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Corporations Amendment Regulations 2004/05: Fee Disclosure and Other Regulations - 23/12/2004
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