ASIC today released the findings from its recent review of superannuation trustees’ communications with their members about changes introduced through the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 (PYSP).
The PYSP reforms were introduced to protect the superannuation savings of Australians from erosion due to inappropriate fees and insurance premiums as well as to reduce unintended multiple low balance accounts. The key changes were designed to benefit members with low superannuation balances (below $6,000) and those with accounts that have been inactive for 16 months (refer Background).
REP 655 presents findings from ASIC's review of a broad range of communications material from 12 superannuation funds with six million member accounts. The funds were chosen on the basis that, because of their relatively high number of inactive accounts, they were likely to be considerably affected by the PYSP reforms.
ASIC undertook the review because of concerns that unbalanced trustee communications could undermine the effectiveness of the PYSP Act in producing benefits for members.
ASIC Commissioner Danielle Press said, "A superannuation trustee’s approach to member communications is critical for the success of the PYSP reforms. Our review found some good member communication. However, there were some common problems with the material we reviewed, which suggested trustees are not always sufficiently focused on their members’ needs."
Some of the communication material reviewed by ASIC did not provide sufficient context for the reforms or adequately explain what the changes meant for members. Some communications used complex language, promoted a particular option that may not have been suitable for the member or failed to include relevant information about the member’s existing superannuation arrangements that would have been helpful.
Ms Press said, “Many Australians, including those targeted by the PYSP reforms, are not engaged with their super – it is unclear which piece of communication a member may read. So it is all the more important for trustees to get their communications right. They must ensure that their members are not exposed to unbalanced messages in any communication they receive.
“To implement the reforms effectively, trustees need to take a member-centric approach to designing and delivering their PYSP communications. They must ask themselves: Will this approach help my members make decisions in their interest?
“We are reminding trustees to balance their focus on their own operational priorities, such as growing the number of member accounts or maintaining certain insurance arrangements, with ensuring benefits for those members targeted by the PYSP reforms,” she said.
ASIC will provide feedback directly to the trustees who participated in the PYSP communications review. Additionally, ASIC also examined disclosures about PYSP reforms from a number of other trustees and third parties. Some of those trustees have made changes to their disclosure practices as a result.
While the communications review is not exhaustive, the findings are important to all trustees framing communications to members on PYSP and related reforms, as well as other topics more broadly. REP 655 also provides information and tips for trustees and sets out ASIC’s expectations about future communications.
“We encourage all trustees to revisit their member communications in light of our review and consider whether they are providing clear, accurate and actionable information about the PYSP reforms. Communication with members about such important matters should not be treated as a compliance exercise,” Ms Press said.
ASIC will continue to monitor trustee communications in relation to PYSP and related reforms and consider taking regulatory action where further issues are identified.
The Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 amended the law to make the following changes:
- Insurance is opt-in for members whose accounts have been inactive for 16 months.
- Fund members with balances under $6,000 whose accounts have been inactive for 16 months will have their accounts paid to the Australian Tax Office (ATO). The ATO will take proactive steps to consolidate the inactive accounts with the members’ active super fund.
- Fee caps are imposed on certain fees for account balances under $6,000.
- Exit fees may not be charged for moving money from a superannuation account.
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, which are due to take effect on 1 April 2020, 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.
ASIC previously issued a media release and letter about expectations in relation to member communications for the PMIF reforms.