On 20 July 2017, a new Product Disclosure Statement (PDS) was issued for Netwealth Super Accelerator and for Netwealth Super Wrap. The new PDS includes changes applying to existing members as described below.

With effect from 21 August 2017 we will only accept application on the forms that accompany the PDS dated 20 July 2017 for Super Accelerator.

The updated disclosure documents and accompanying Guides, which contain the full details of these changes, are available on our website or by contacting us directly on 1800 888 223.

1. Changes to superannuation regulations

Over the last 12 months the government has announced a range of changes to superannuation regulations and tax. The updated PDS and Information Guides will contain details of the changes to superannuation which took effect on 1 July 2017. A summary of the superannuation changes is set out below:

• introduction of cap on balances in retirement phase income streams that are exempt from tax on earnings, set initially at $1.6 million;
• removal of the tax exemption on investment earnings for transition to retirement income streams, prior to satisfying a condition of release. If, having started a TTR Income Stream, a member meets an applicable condition of release, the TTR Income Stream is in ‘retirement phase’ and the earnings and realised capital gains will not be taxed within the Fund and the restrictions on commutation to a lump sum and the 10% maximum pension limit cease to apply;
• reduction in the annual concessional (before tax) contributions cap to $25,000;
• reduction in the annual non-concessional (after tax) contributions cap to $100,000;
• introduction of catch-up concessional contributions over a 5-year period (from 1 July 2018);
• increase in income threshold for spouse superannuation tax offset to $37,000;
• reduction in the income threshold for the definition of very high income earners to $250,000;
• removal of option to treat a pension payment as a lump sum payment, for tax purposes;
• removal of anti-detriment provisions for superannuation death benefits;
• restricting the ability of individuals to make non-concessional contributions to those with total superannuation savings of less than $1.6 million; and
• removal of the requirement that an individual must earn less than 10% of their income from employment-related activities to be eligible to claim a tax deduction for personal contributions made to superannuation.

We have made amendments to the Trust Deed and to our processes to enable these changes to be implemented.

2. Update to the minimum cash requirement

As a result of our new auto sell down process for topping up a member’s cash account, we have been able to reduce the minimum cash requirement for members who receive monthly payments from an income stream or who hold insurance in their super account. The additional amount members are required to hold in cash to provide for these benefits has been reduced from 2 monthly amounts to 1 monthly amount, as described below.

The ’minimum cash requirement’, is 1% of your account balance or $500, whichever is greater, up to a maximum of $5,000. The following amounts are required to be added to the ‘minimum cash requirement’:

• where you are receiving monthly payments from an income stream or pension, an amount equal to one monthly payment;
• where you are receiving quarterly payments from an income stream or pension, an additional amount equal to one quarterly payment; and
• where you have insurance in place, an additional amount equal to one monthly or one quarterly insurance premium payment (as applicable).

This change has already been implemented.

3. Update to the Reinvestment Plan

As a result of requests from members and advisers we have introduced a new distribution reinvestment option for managed funds. Under the Reinvestment Plan members now have two ways to make further investments into managed funds held in their account:

• Distribution reinvestment: this is a new feature, available immediately, which allows distributions received from a particular managed fund to be reinvested back into that same managed fund; and
• Income reinvestment: where the monthly net income from all investments and other regular contributions that are paid into a member’s account are invested into one or more managed funds that is selected.

4. International securities process

We have improved our processes for trading international securities. Members and their adviser, can now trade international securities in their account by providing us with direct instruction online through their account.

5. Update to the wholesale cash administration fee

There is a cash account fee on funds held in a member’s cash account. We set the cash account fee so that the rate of interest credited to their cash account (net of the Netwealth fee) is no more than 0.50% p.a. below the official cash rate. For example, if during a month, the official cash rate is 2.0% p.a., we set the cash account fee so that, after taking out the fee, interest is credited to their cash account at the rate of at least 1.50% p.a. The amount of this fee will therefore be dependent on our ability to negotiate rates with the banks with whom the cash is invested. We estimate that this fee will be between 1.40% p.a. and 1.45% p.a. but this may change if there are changes in the official cash rate and/or the interest rate we receive. The cash account fee is an indirect fee deducted from the interest earned on pooled cash before the interest rate for their cash account is declared. This fee is not deducted from their account.

This change took effect on 20 July 2017.

6. Operational Risk Financial Requirement

As the trustee of the Fund, the Australian Prudential Regulation Authority requires us to have an amount put aside to address operational risk events that may affect our business operations. This is known as the Operational Risk Financial Requirement or ‘ORFR’. We meet the ORFR with a combination of accumulated reserves held within the Fund and our own capital that we put aside specifically for that purpose. The capital we put aside for this purpose is provided by our parent company and we pay our parent company a fee for the use of that money, based on the amount of capital provided. The fee is reimbursed from the Fund and the cost is apportioned between each member’s account based on the value of their investments. We currently estimate that an amount up to 0.025% p.a. of the value of a member’s account (calculated daily) will be deducted from members cash account quarterly¹. The actual amount deducted is likely to be less than this and will change from time to time because the size of the ORFR and the cost of capital are likely to change. The annual member statement will set out all amounts charged for the ORFR.

Instead of deducting the full amount to fund the ORFR from each member’s account, members will effectively pay an interest charge on the amount that would otherwise have been deducted. We believe this is an equitable way of managing the ORFR obligation for members.

7. Managed Model Performance Fee for certain Managed Models

We have included the ability to include a Managed Model Performance Fee for Managed Models available in the Managed Account.

The Managed Model Performance Fee does not apply to any existing investment options members currently hold in their account.

This fee only applies if members make an investment through a Managed Model in the Managed Account that has a performance fee. If applicable, the performance fee is payable if the Managed Model performance exceeds the specified benchmark return over the relevant period for that model.

Information about the performance fee and how we determine if a performance fee is payable, is set out in the Managed Account PDS. Further information about how the performance fee is calculated for each applicable Managed Model, is set out in the relevant Managed Model Profiles document.

8. ASX listed securities – brokerage fee

As a result of a review of trading costs, the ASX listed securities – brokerage fee will change from 7 September 2017 as outlined in the table below:

9. Minimum fees applying to member accounts

The Trust Deed says that we may charge ongoing administration fees of up to 2.00% p.a. of a member’s account balance. This is subject to a minimum fee which may be more than 2.00% p.a. (ie. where the minimum fee exceeds 2% we may charge the minimum fee). The PDS clarifies that the administration fees described in the PDS are in effect the minimum fee. In some instances the minimum ongoing administration fee will exceed 2% due to small balances and large cash holdings. In the past, we have rebated amounts in excess of 2.00% to clients though we are not obligated to do so. Going forward we will no longer be providing those rebates.

This is not a change to the rate at which we charge fees, but a clarification that the minimum fees are not limited to 2.00% p.a.

10. Illiquid assets in Term Allocated Pension accounts

If a member invests in the Income Stream Service and if, at any time, in our opinion the member is likely to have insufficient liquid assets in their account to enable us to pay their minimum income payment when it becomes due, we may transfer their entire account from the Income Stream Service to Personal Super.

11. Changes to meeting notifications

From time to time we may be notified of shareholder meetings (in relation to listed securities) or unit holder meetings (in relation to managed funds). If we deem such a meeting to be material, information about the meeting will be made available on our website.

Details of meetings will be displayed on the dashboard under ‘Corporate Actions’. We encourage members and their advisers to check the dashboard periodically for any new notifications.

As information regarding meeting notices will now be made available online, we will no longer send members or their advisers meeting notifications via email or post.

Further information on the voting process will be available on the meetings page, and is contained in our voting policies, which are available by contacting us.

12. Changes to the way fees are disclosed

As the provider of the PDS, we will have to comply with new disclosure requirements relating to the way fees and costs are disclosed in the PDS from 1 October 2017. These requirements are detailed in Class Order 14/1252 and the revised Regulatory Guide 97. We have chosen to opt in to this regime early, and as such this PDS has been amended to comply with these requirements.

The fees and costs of the product have not changed other than where we have provided you with the information in this notice. You may however, notice that the way fees and costs are set out is different and that more information on these fees and costs has now been provided.

¹ Calculation of the ORFR amount to be deducted from members’ accounts will commence on or after 1 October 2017 and deducted on 31 December 2017 or earlier withdrawal.