A number of superannuation trustees have failed to clarify the new Protecting Your Superannuation Package reforms for members, according to a new ASIC review, which may threaten the effectiveness of the new bill.
The Protecting Your Superannuation Package (PYSP) Act was introduced in July last year with the aim to protect consumers’ savings from erosion due to inappropriate fees and insurance premiums as well as to reduce unintended multiple low balance accounts.
The key reforms were designed to benefit members with low super balances (below $6,000) and those with accounts that have been inactive for 16 months.
ASIC has examined 12 super funds with 6 million member accounts, reported to have a high number of inactive accounts (likely to be affected by the reforms).
Its report has revealed that many of the trustees did not provide information that would have been helpful for members, failing to include relevant information about the members’ existing superannuation arrangements such as last contribution date, current premium, benefit levels, key terms and exclusions in their insurance coverage.
The regulator is concerned that unbalanced trustee communications could undermine the effectiveness of the PYSP Act in producing benefits for members.
ASIC commissioner Danielle Press said the approach of trustees was critical.
“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,” Ms Press said.
“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?”
Some of the communication material was said to not provide sufficient context for the reforms or adequately explain what the changes meant for members. Some were reported to use complex language or promote a particular option that may not have been suitable for the member.
“Our review found some good member communication,” Ms Press said.
“However, there were some common problems with the material we reviewed, which suggested trustees are not always sufficiently focused on their members’ needs.”
ASIC said it will provide feedback directly to the trustees involved in the review.
Further, the regulator has also looked at disclosures around the reforms. Some of the trustees have made changes to their disclosure practices as a result.
“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.
The regulator will continue to monitor trustee communications in relation to PYSP and related reforms and it has hinted at taking regulatory action where further issues are identified.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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