Home / Life Insurance / Trustees ‘falling short’ in explaining super reforms, says ASIC
17 February 2020
A number of fund trustees are failing to properly explain to members the changes in super laws that could affect their accounts, an Australian Securities and Investments Commission (ASIC) review says.
It says some trustees haven’t used “appropriate context and balanced communications” to relay the Protecting Your Superannuation Package reforms that were passed last year.
The super reforms are aimed at protecting erosion of retirement funds from inappropriate fees and insurance premium deductions.
As a result, trustees are now required to cancel insurance on accounts that have been inactive for 16 months and transfer accounts with less than $6000 to the Australian Tax Office unless the member acts.
Additionally they must cap administration and investment fees at 3% for accounts with balances of less than $6000.
The ASIC review also finds some trustees have placed insufficient emphasis on members’ needs and the information provided did not contain relevant details that would have helped members understand the changes involved.
Information that was absent includes current premium, benefit levels, key terms and exclusions in insurance coverage.
“We saw instances of communications that highlighted the benefits of retaining insurance but didn’t refer to the conditions and waiting periods for being able to claim on such policies,” the ASIC report says.
“Trustees tended to emphasise the value and benefits of insurance. Some conveyed a sense that paying the insurance premiums would have minimal impact on a member’s day-to-day financial situation.
“There was little attempt by some trustees to link the changes to the objectives behind the [super] reforms, or to emphasise that even if the payment has little impact on a member’s current financial situation, it will have an impact on their retirement savings.”
ASIC is currently engaging with the trustees that came up short in the review and will take action if they “break the law as a result of issuing misleading communications”.
The ASIC review covered 12 super funds with over six million member accounts.
Choice-linked Super Consumers Australia says the ASIC review has identified similar issues to those it raised last September with trustees.
“Superannuation funds need to do much better when communicating with members,” Director Xavier O’Halloran said. “We're calling on super funds to take heed of ASIC's findings.
“This is their chance to improve. Next time we'll be encouraging the regulator to take enforcement action.”