The COVID-19 pandemic has caused all of us to question what we should—and should not— be doing at this time. Getting this right both now and in the immediate future is crucial, particularly for the superannuation industry. How the industry tackles the ongoing challenges presented by the pandemic has significant repercussions for all Australians. At ASIC, we know that industry wants certainty about what we expect your organisation to prioritise and information about the focus of our work in this environment.
Our priorities and yours
ASIC recently published its Interim Corporate Plan, which sets out five organisation-wide priorities to tackle the challenges presented by the COVID-19 pandemic:
- Protecting consumers from harm at a time of heightened vulnerability;
- Maintaining financial system resilience and stability;
- Supporting Australian businesses to respond to the effects of COVID-19;
- Continuing to identify, disrupt and take enforcement action against the most harmful conduct; and
- Continuing to build our organisational capacity in challenging times.
Many of you will have also been considering your priorities in this changed environment. ASIC recognises that, to cope with the pandemic, your organisations need the capacity to take the steps necessary to comply with your obligations and protect your members’ interests.
We have taken steps to provide clarity about our current expectations of superannuation trustees. On 1 April 2020, we issued a joint letter with APRA and published some frequently asked questions to be clear about our expectations. We will continue to add to these questions as new issues arise.
Both regulators also postponed a range of regulatory activities to allow trustees to focus their resources and attention on responding to COVID-19. But it must be emphasised that trustees’ compliance with their legal obligations cannot take a backseat in the current environment. Staying true to the core of your trustee duties — that is, focusing on your members’ interests —remains crucially important. In the absence of specific relief, your trustee obligations are unchanged.
Supporting members through good communication
Now more than ever, superannuation trustees have an important role to play in supporting their members by providing balanced, factual and timely information to their members about superannuation issues.
We have reviewed superannuation trustees’ websites and some other public communications to members about COVID-19 matters. We have focused on the websites of those funds collectively responsible for over 75 per cent of funds under management. Most presented detailed and accurate information. Where we had concerns, we have contacted the trustees to make amendments.
- Early release modelling: One area that we paid particular attention to is estimates about the impact of early release on retirement balances. We encourage trustees to ensure that they use reasonable assumptions and model their estimates in today’s dollars to avoid presenting misleading information.
- Disclosure requirements: We also looked at disclosure requirements where members have a zero-balance due to early release. The trustee may need to provide a member with an exit statement (and then a new PDS for any subsequent contributions), depending on the governing rules of the fund.
- Insurance in super: Trustees should also communicate with members about potential loss of insurance at this time. One common issue we found was that there was little detail on how members’ insurance through their superannuation may be affected due to COVID-19. Trustees should communicate in a clear and balanced way about how accessing superannuation early may affect members’ insurance cover and what options they have to reinstate cover. For some, this means a personal communication about loss of insurance.
We know that there will be ongoing challenges with communicating to members in relation to COVID-19. While you may not be able to eliminate the confusion and anxiety, good communication can help minimise misinformation. Getting your communications approach right is good practice. We set out some tips on this in our recent report on PYSP communications.
Providing financial advice and helping protect members from scams
For many Australians, the first place they will seek assistance in relation to their superannuation is from their superannuation fund. It is important to be aware that in the current environment, members may be looking for more than factual information or general advice. Accessing superannuation early is a significant financial decision. For these members, access to quality personal advice is crucial.
To facilitate access to free or affordable advice about the early release to superannuation scheme, ASIC has issued a range of relief measures that:
- allow advisers to give a Record of Advice (ROA), instead of a Statement of Advice (SOA), to clients when providing advice about the early release scheme
- permit registered tax agents to give advice to existing clients about the early release scheme without needing an Australian financial services (AFS) licence, and
- take a no-action position to allow superannuation funds to more readily provide ‘intra-fund’ advice in relation to the early release scheme.
The no-action position allows for a broader range of matters to be considered in the context of the advice, such as matters relevant to the member’s financial position and household circumstances. It is subject to restrictions that make it clear that the member must be proactively seeking advice of this kind – trustees should not be the ones to initiate the conversation.
We are undertaking surveillance work to check that the advice relief measures are serving the interests of consumers.
An area where there is a risk of member harm in the current environment is from scams and fraud. We are working with other government agencies such as the ATO, ACCC, AFP, AUSTRAC and APRA to monitor and take action on scams and fraud affecting consumers, not limited to the early release of superannuation.
It is often only by working together that appropriate action can be taken to address these issues. So I encourage trustees to continue to be vigilant about protecting their members’ interests and promptly share intelligence with the regulators.
Delivering for Australians
Australians recognise that superannuation plays an important role in their financial security, and many have turned to their superannuation funds during this pandemic to get clarity on how to navigate the current economic landscape.
Which funds are going to come out of this pandemic ahead of the pack? I think trustees that reflect on the following questions are going to be better placed to be successful.
First, to what extent is going beyond complying with prescriptive legal requirements the right thing to do? For instance, there is no explicit obligation to provide helpful website material but this may be more valuable than only sending a significant event notice much later.
Second, what opportunities have recent member interactions provided to gather and act on data about people and their behaviour? Consider what information this provides about systemic problems in processes or the way members engage with their superannuation works when under stress.
Third, what guiding principles are applied when making difficult decisions and compromises? Are these principles firmly about delivering for members?
Trustees cannot be complacent when it comes to the role of superannuation in Australia. We should reflect on what the past few months have taught us and continue to adapt and evolve. The continued success of the superannuation system in Australia relies upon your next steps.