Minister for Financial Services Stephen Jones has lashed out at super funds over a “catalogue of poor customer experiences” that have emerged over the past year.
In an address to the AFR Super & Wealth Summit on Tuesday, Minister Jones said it was important for super trustees to be held accountable for their customer service.
“Unresponsive, slow, and not member‑focused. This is a $3.5 trillion industry. This is not the standard that members will accept and it’s certainly not the standard the government will accept, and it shouldn’t be the standard, frankly, that funds accept,” he said.
“With 5 million Australians either at or approaching retirement, funds must urgently lift their game.”
The minister pointed to a targeted review by the Australian Securities and Investments Commission (ASIC) late last year that found that approximately 20 per cent of funds failed to consistently respond to complaints within the mandatory 45-day timelines.
He also highlighted a joint review by the Australian Prudential Regulation Authority (APRA) and ASIC (ASIC) this year which concluded that funds exhibited a “lack of progress and insufficient urgency” in embracing the retirement income covenant (RIC).
Additionally, Minister Jones shone a spotlight on a 32 per cent increase in super complaints reported by the Australian Financial Complaints Authority (AFCA) in the last financial year.
“I acknowledge that, for 30 years, the superannuation industry has done an excellent job of building larger and larger retirement balances. Seven per cent per annum on average over 30 years, a source of great pride,” the minister said.
“Funds will need to continue to do that into the future for their younger members. But they will also need to help their older members start to draw down on their savings in a way that best meets their needs. In short, funds are going to need to do more. Much more.”
Regarding the expanded role that super funds will play in providing financial advice in the future, Minister Jones suggested that this provides an opportunity for funds to be more innovative with how they engage with their members and what they are able to offer.
“Superannuation has a unique challenge because we’ve made it so easy for members in the accumulation phase to limit their engagement with their fund,” he said.
“However, the future is likely to require more meaningful interactions between funds and their members and advice will be critical to that. More informed and more timely decisions – absolutely critical – in a safe, consumer‑first environment which satisfy the members’ needs.”
Areas of improvement
Beyond advice, the minister identified a number of other areas of improvement for funds.
“The day-to-day interactions, responsiveness to claims, all of these things need to be done. Improving datasets, improving the knowledge and information that funds have about their information, moving from that very passive interaction that funds have had traditionally with their members to a much more active and engaged interaction is critical,” he stated.
“We should do it because it’s the right thing to do but we should also do it because we understand that the expectation that a member will have of their superannuation fund is not going to be special or different to the expectation that they have in their interactions with any other financial service or any other business and I don’t think anyone to say that we’re there yet.”
Minister Jones also discussed the results of APRA’s latest annual performance test, which this year was expanded to include the choice sector.
While only one MySuper product did not pass this year’s test, more than one in 10 of the choice products assessed failed, which the minister said is “simply not good enough”.
“Every year that people languish in underperforming products, they are missing out on future retirement income,” Minister Jones said.
“Because of our decision to extend the test to further funds, members from the 60,000 accounts with failed choice products have now been notified that their superannuation product is failing them.”
He acknowledged that, as the worst performers exit the industry, the performance test will need to evolve into a “more enduring test”.
“But the test itself will remain. Trustees should be able to demonstrate the value that they provide and that every dollar is being spent in the best financial interests of their members.”
In conclusion, the minister said that the government will continue to hold trustees to account for their investment performance and their customer service.
“The sector must lift its game to help members achieve a dignified retirement and they must be more responsive and more innovative,” he said.
“Members have a right to expect the highest standards from their funds and the highest standards of performance in growing their savings and performance in knowing and serving their members so that outcomes of members are at the heart of the system. That’s the objective of superannuation.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
