ASIC has called on superannuation trustees to improve the standard of communication to fund members about important reforms impacting member insurance arrangements.
As a result of the recent Putting Members’ Interests First (PMIF) reforms, by 1 December 2019 superannuation trustees are required to write to members with a balance of less than $6,000. These members must be notified that their insurance cover may cease from 1 April 2020 unless they opt-in to continue this cover.
ASIC has issued a letter to the superannuation industry about the PMIF reforms and ongoing communications about insurance in superannuation.
ASIC expects trustees to help their members understand the impact of the reforms on them and make good decisions by:
- providing balanced and factual communications, that include appropriate context about the reforms, and
- tailoring communications to the needs of their members.
A recent review by ASIC found that many superannuation trustees did not adequately communicate with members in a similar situation when they were about to be impacted by the Protecting Your Superannuation Package (PYSP) reforms.
ASIC Commissioner Danielle Press said, ‘The superannuation industry needs to learn from what happened earlier this year when trustees communicated with their members about the PYSP reforms.
‘The PYSP communications reviewed by ASIC were not always balanced in providing members with all available options to them, including the reason why ceasing insurance might be appropriate.
‘ASIC expects trustees to follow ASIC’s guidance, based on its initial review of the PYSP communications, in designing their communications from now on. Communication with members about important matters, such as their insurance, should not be dismissed as a ‘mere exercise in compliance.’ Trustees need to act to help their members understand what the reform means for the member.’
ASIC has also provided consumer information on the PYSP and PMIF changes on its MoneySmart website accessible via the following link: Cancellation of insurance on inactive and low balance accounts.
ASIC intends to release further findings from its PYSP review work in early 2020.
Background
The reforms in the Treasury Laws Amendment (Putting Members’ Interests First) Act 2019 are designed to protect low balance accounts and the superannuation savings of members aged under-25 from balance erosion due to insurance coverage they may not need. These reforms are due to take effect on 1 April 2020, with initial notices to be sent by 1 December 2019.
The reforms involve the following changes:
- Insurance will be opt-in for members in a regulated superannuation fund with product balances below $6,000, and
- Insurance will be opt-in for new members under-25 years old.
The member may elect in writing to take out or maintain insurance even if the member has an account balance with a superannuation fund that is less than $6000 or the member is under the age of 25. There are some exclusions to these changes, including for members identified by their trustee as in dangerous occupations.
Key deadlines for action that trustees must adhere to are:
- Trustees must identify members with balances less than $6,000 on 1 November 2019
- By 1 December 2019, trustees must give notice to impacted members with balances less than $6,000, indicating that if their balance remains less than $6,000, their insurance cover will cease on 1 April 2020 unless there is an election in writing to maintain insurance, and
- By 1 April 2020, insurance is not to be provided to members who have an account balance less than $6,000 or for members under-25 years old, unless the member has elected in writing to take out or maintain insurance.
ASIC previously issued a media release and letter outlining the reforms set out in Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 and ASIC’s expectations in relation to member communications.