ASIC puts super funds on notice over complaints handling processes

ASIC has found signs of ‘significant compliance issues’ in how super funds deal with complaints from members.

An ASIC review has found signs of ‘significant compliance issues’ in super funds’ handling of complaints.

The corporate regulator has put superannuation funds on notice over their complaints handling processes following a review that found signs of “significant compliance issues”.

Among the concerns flagged by the Australian Securities and Investments Commission were that some funds were failing to properly record member complaints, while others were taking too long to respond to grievances.

The warning from the regulator comes after it examined the internal dispute resolution practices of 38 super funds covering more than 49,000 complaints received between October 2021 and late February 2022.

“ASIC’s surveillance about internal dispute resolution practices of trustees has identified some problem areas that need fixing,” ASIC commissioner Danielle Press said.

“We want trustees that have fallen behind to strengthen their internal dispute resolution arrangements to make sure that member complaints are handled in an effective, fair and timely way.”

While super funds are required to record all member complaints received, ASIC found that 10 per cent were documenting less than 10 complaints for every 10,000 members, substantially lower than the overall rate.

ASIC said it was “concerned that the low complaint rate may be a result of some trustees failing to record all member complaints or adopting an inappropriately narrow definition of ‘complaint’”.

The regulator also found that some funds were lacking in promptly addressing complaints: across the 38 funds reviewed, 2.7 per cent of fund responses to complaints were sent after the 45-day maximum time frame required by law.

Of these, seven funds sent out 10 per cent or more of their responses after 45 days.

“ASIC is concerned that trustees may be over-applying the limited exceptions to the maximum time frame or not sufficiently monitoring how long complaints take to resolve,” the regulator said.

Complainants were also not notified of delays to their responses almost 50 per cent of the time, while one in three trustees admitted to the regulator that there were varying degrees of process failures or errors in their IDR systems.

“Dispute resolution is an essential part of the consumer protection framework in Australia,” ASIC Commissioner Danielle Press said.

“A trustee’s approach to dispute resolution is a meaningful measure of whether they are focused on the interests of their members. It also indicates the maturity of the trustee’s approach to risk.”

All trustees must have effective arrangements to deal with member complaints, she added.

“Trustees should continually monitor and update their processes to ensure these remain fit-for-purpose,” Ms Press said.

The warning from the regulator comes as super funds brace for the latest results of the sector’s annual performance test, due at the end of the month.

Superannuation research house SuperRatings on Wednesday predicted that 90 per cent of MySuper options would pass the test, based on June data.

“But some products will likely fail the test a second time when the results are announced in late August, triggering the prevention of new members from joining these products,” SuperRatings said.

The results of the 2021 performance test showed that more than a million workers had entrusted their retirement savings to a dud superannuation fund.

The test, brought in as part of the Morrison government’s Your Future, Your Super reforms, revealed that 13 of 76 funds — or 17 per cent of those assessed — failed the crucial evaluation.