Minister for Financial Services Stephen Jones has warned superannuation funds the government expects them to improve member experience or face the consequences.
Speaking at the Investment Magazine Group Insurance Dialogue in Sydney on Tuesday, Jones said trustees need to “lift the bar” to ensure customer service standards are being prioritised alongside investment performance efforts.
“We celebrate the successes of superannuation – it’s a great national achievement,” the minister said. “We also need to call out the absence of assistance where we see it. I am going to say this bluntly: service standards in the superannuation system need to improve. Funds have to do better – and now.”
If trustees don’t improve their communications and engagement with members, especially relating to helping them plan for retirement, the “government will move”, Jones said, insinuating it would pursue legal or regulatory enforcement action.
The comments follow a joint review by APRA and ASIC, released on Tuesday morning, which found trustees need to “make more progress to enhance retirement outcomes”. It concluded that many are falling short of their legal obligation to help members prepare for retirement, which took effect in July last year under the covenant legislated by the previous Coalition government.
The review, which examined the progress of 15 trustees collectively managing $862 billion worth of assets on behalf of five million Australians in or approaching retirement (that is, over the age of 45), found many trustees had a retirement income strategy in place, but had not integrated it into their business plans, as required under Prudential Standard 515.
It found many trustees were not extracting sufficient information about their members or collaborating with external financial advisers where a professional advice relationship exists.
“Funds should know their members – that’s a basic expectation,” Jones said.
“But the review finds that most funds have identified gaps in the information they need about their members. The majority of RSE [register of superannuation entities] licensees cannot even properly assess the retirement outcomes provided to members.”
It also comes amid research currently being undertaken by Investment Magazine publisher Conexus Financial and research house CoreData which ranks funds on member experience. Early findings of that research has concluded some of the largest funds are not set up to provide quality individual service.
The minister also warned insurers that the products they offer to consumers via group insurance arrangements with trustees needed to be fit for purpose.
“Insurance can help members achieve a dignified retirement where they experience early retirement due to incapacity or interrupted work patterns during their working life,” Jones said.
“But for insurance in superannuation to achieve its desired benefits, the insurance sector needs to lift its game. Members have to come first.”
He added these group insurance products have to be tailored to consumer needs.
“They need to be affordable, because the premiums are paid from retirement savings and insurers need to pay out in a timely fashion for appropriate claims,” Jones said.
One third of superannuation-related complaints to AFCA relate to total and permanent disability (TPD) and income protection, with the authority receiving two complaints each day, on average, about claims handling delays.
Jones said insurance claims handling would be a “big focus” for the government going forward.