‘Poor service, no urgency’: Jones slams super funds

Three million Australians will be eligible to draw down their super in the next 10 years, prompting a demand from the top for the industry to clean up its act.

The banking regulator and corporate watchdog will join forces to pressure super funds to be more proactive in taking action to help their members as they move into retirement.

The Australian Prudential Regulation Authority and Australian Securities and Investments Commission have signalled plans to take tougher action, including writing more obligations into the prudential framework for super funds to push funds to provide more help for members approaching retirement.

This follows a scathing joint report by the two regulators which complained about the lack of urgency by super funds in implementing the goals of the Retirement Income Covenant which came into force a year ago and criticism by Financial Services Minister Stephen Jones of poor customer service from super funds.

In a frank interview with The Australian on Tuesday, senior members of both agencies said they would be “joined at the hip” in pushing funds to take more action with funds urged to change their mind set from accumulating funds to providing more customer service as more Australians moved towards retirement.

“APRA and ASIC will be in lockstep on this as we move forward and look into what we need and expect the industry to do,” ASIC Commissioner, Danielle Press, said.

“Super funds need to be able to manage great returns, deliver on good fees and provide good quality service and have good quality engagement with their members.”

“If they can’t do those three things at the same time, they have got to think about whether they should be in business or not.”

She said the review of how funds had responded to the Retirement Income Covenant showed that while funds had broad statements of intent on their retirement income strategy, they needed to be more proactive in looking for ways to help their customers.

“What we really need now is for (the goals they set out on their website) to be turned into action and given life.”

“They need to look at their data and create cohorts of members as they go into retirement.

“The industry has done a great job in building retirement savings. What we need to work out now is how to get people to use their retirement savings to have a dignified retirement alongside the pension.”

“The super funds are well placed to provide that help to their members- they need to step up and do it.”

She rejected suggestions that funds were afraid to provide too much help to their members for fear of falling foul of strict regulations on providing personal financial advice to members.

She said there was a lot they could do within the existing laws to provide more help and support for their members.

APRA deputy chair, Margaret Cole, said APRA may need to look at doing something which is “harder edged” to push funds to be more proactive in developing strategies to help their members in retirement.

She said there needed to be a “change in mindset” by super funds away from just focussing on helping their members accumulate assets and helping members through their retirement.

“If you can’t deliver on what is the core of your mandate, you shouldn’t be playing in this space,” she said.

“Maybe it is hard and complex but there is no room for it to be pushed off indefinitely anymore.”

Their comments came after Financial Services Minister, Stephen Jones, hit out at super funds for their “lack of urgency” and poor customer service in helping members as they enter retirement.

In a speech to a breakfast hosted by financial publishing group Conexus, Mr Jones said a new joint report by the two regulators showed there was a “lack of progress and a lack of urgency” by funds in implementing retirement income strategies for their members.

There had also been an “absence of assistance” by funds to members needing help as they moved into retirement.

“Service standards in the superannuation system need to improve,” he said.

“Funds have to do better. And now.”

Mr Jones said five million Australians were now either retired or approaching retirement.

He said the average Australian was now retiring with over $200,000 in super and needed help from their fund in navigating the process.

“Australians expect that their super funds will be ready to help them navigate it,” he said.

He said a recent report by ASIC last December had found that almost 20 per cent of super funds had failed to consistently respond to member complaints within the mandatory 45 day deadline.

Some 80 per cent of funds were “poorly set up to deal with systemic issues.”

Mr Jones comments come amid media reports about delays by members in getting responses by super funds, including two widows having problems getting access to their husbands’ super funds, one taking 15 months of interaction with the fund before she got her husband’s money.

Super funds have been legally required to develop a retirement income strategy to help members approaching or in retirement under the Retirement Income Covenant which came into force in July last year.

APRA deputy chair Margaret Cole said there had been insufficient urgency in the sector. Picture: John Feder/The Australian.

The joint report by ASIC and APRA, said funds had made an improvement in their offerings of assistance to members in retirement, but it found that the quality of action had varied amongst funds.

It said super funds had identified gaps in the knowledge they needed to help members understand their retirement needs but “very few had plans to address those gaps.”

It said trustees needed to take more action to design assistance programs which were “fit for purpose” for their members.

It said many super fund trustees had “not embedded their retirement income initiatives as concrete actions in their overall business plan.”

A majority of trustees did not have any quantitative metrics to assess the retirement outcomes of their initiatives.

APRA’s Margaret Cole said another three million members would become eligible to draw from their super in the next 10 years.

“They are entitled to rely upon their super fund for assistance as they plan for a sound financial future,” she said.

“Some trustees have made a good start, but overall there has been a lack of progress and insufficient urgency. “

“As more members approach retirement, trustees must step up and deliver both well-considered strategies and action to support members in retirement.”

She said APRA would be stepping up its attention to how funds implemented the covenant, discussing proposed improvements to the system later in the year.

ASIC’s Danielle Press said Australians contributed to their superannuation for many years in anticipation of financial well-being in retirement.

“Helping fund members achieve good retirement outcomes is the core business for a super trustee and the retirement income covenant offers a lot of flexibility for trustees to effectively support their members’ needs.”

“Trustees must get the fundamentals right – their retirement income strategies must be designed with consumer needs in mind and be evidence-based.

“They need to be mindful that their members’ needs evolve over time and commit to continuously monitoring and improving their approach,” Ms Press said.

The report comes as the government has announced plans to let super funds become more active in the provision of financial advice to their members.

This follows the release of the Quality of Advice review by Allens’ partner, Michelle Levy, who recommended major changes to laws around the provision of financial advice to make it more accessible and affordable for ordinary people.

Originally published as ‘Poor service, no urgency’: Jones slams super funds