Super funds were hit with a stark warning this week regarding “inappropriate” fees and insurance, with the Australian Securities and Investments Commission (ASIC) vowing to keep a close eye on how they inform their members about upcoming changes to the law.
ASIC called on providers to communicate clearly with people about the Protecting Your Super Package (PYSP) of legislative reforms, which will come into effect on July 1, 2019, following a recent report by the Productivity Commission.
The new laws are designed to protect Aussies’ super savings from unnecessary fees by removing exit fees for moving money out of an account, capping fees for those with super balances of less than $6,000, as well as making insurance opt-in for members whose accounts have been inactive for 16 months.
“Erosion of superannuation through unnecessary fees and premiums for potentially unsuitable insurance is a significant issue for many Australians,” ASIC Commissioner Danielle Press said.
“Most consumers are not aware of the fees and insurance premiums charged to their superannuation accounts or the steps they can take to avoid unnecessary reduction in their super balance.”
The reforms will also reduce the number of unintentionally held multiple accounts after it was revealed that one third of all funds in Australia actually fall into this category, eroding member benefits by around $2.6 billion annually.
Press added that superannuation trustees are expected to communicate “responsibly” with members in a “helpful” manner, with ASIC also threatening to take action against those who break the law through misleading communications.
She said: “How a trustee communicates with their members about the PYSP changes will give us an indication of the trustee’s commitment to members’ best interests.”
The Productivity Commission released their 722-page report back in January, claiming that some super funds could actually be boosted by as much as $500,000 if the federal government chose to adopt their recommendations.
The advisory body called on the government to cancel the licences of funds which repeatedly underperform for eight years, if they fail to turn things around within a 12-month period, as well as suggesting that Australian workers be provided with a list of the top 10 superannuation funds to choose from when they start a new job.
Speaking on Wednesday, Xavier O’Halloran, Head of Advocacy and Campaigns at CHOICE, said: “Super funds are potentially breaking the law to keep hitting people with duplicate zombie fees and insurance. This is a disgraceful act of self interest. We call on all super funds to heed ASIC’s warning today. Misleading people about their insurance needs and the value of consolidating their accounts is not on. The newly formed Superannuation Consumers’ Centre will be paying close attention to how funds tell their members about changes to the law and report those that fall short.
“The ‘Protecting Your Super Package’ legislation was introduced to protect people’s retirement savings from erosion due to ‘zombie’ fees and insurance. For some funds to try and keep the fee gouge running by misleading people into acting against their own interests is not only galling, but it’s against the law.”
ASIC is working closely with the Australian Prudential Regulation Authority and the ATO to ensure the PYSP legislative changes are implemented appropriately.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.