AMP to repay omitted tax benefits to investors
TheAustralian Prudential Regulation Authority(APRA) has given directions toAMP Life, while theAustralian Securities and Investments Commission(ASIC) has accepted an enforceable undertaking from both AMP Life and AMP Superannuation in relation to tax issues with eight AMP products.
The actions were taken following exclusions by AMP of the tax benefit of imputation credits and other tax allowances in the unit prices of some products, which AMP promptly alerted the regulators to.
AMP says too much tax was paid on a number of its investment options, resulting in the options being undervalued, and adds the matter will be resolved with affected customers receiving either additional units, a cheque, or funds in a retirement savings account.
AMP says about 15 per cent of its customer base is impacted and will receive payment within the next two weeks with the majority of customers receiving less than $100.
The payments are in line with the APRA directions, given under the Life Insurance Act 1995, which require AMP Life to compensate policyholders of the affected funds. The directions also require AMP Life to obtain an independent, external review of its unit pricing processes to ensure that similar issues do not recur.
Meanwhile the undertaking accepted by ASIC, under the ASIC Act 2001, requires AMP to do all acts and things reasonably necessary to ensure that affected fund members are identified, properly notified of the errors, and correctly and promptly compensated.
Both APRA and ASIC are satisfied that the proposals put by AMP to compensate policyholders are reasonable. AMP will contact affected policyholders over the next few weeks with details of the compensation arrangements.
“The time lag in the incorporation of the tax benefit of imputation credits and other tax allowances into the calculation of unit prices is a problem for the industry as a whole. There are no uniform industry practices or guidelines about how to deal with the time lag issue,” APRA deputy chairman Ross Jones says.
APRA and ASIC have now commenced a joint project to look at unit pricing practices in the funds management and superannuation industry.
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