ASIC warns of action against tardy superannuation funds on complaints handling

The corporate regulator is threatening enforcement action against funds that have ‘serious deficiencies’ in their handling of complaints and disputes.

The corporate regulator is threatening enforcement action against superannuation funds that have “serious deficiencies” in their handling of complaints and disputes, prompting the industry to commit to improving processes.

The Australian Securities & Investments Commission on Friday released a new review of super trustee compliance with complaints handling requirements that found some trustees had “sub-standard arrangements” for managing disputes and complaints.

The Australian this week revealed ASIC’s findings relating to super trustees’ internal dispute resolution arrangements, as Financial Services Minister Stephen Jones urged they should serve as a “wake-up call” for the $3.3 trillion industry.

ASIC commissioner Danielle Press said while some super funds were meeting the requirements, many had fallen short of their legal obligations.

“We saw examples of trustees’ failure to comply with fundamental obligations, which could lead to poor outcomes, such as consumers abandoning a complaint rather than seeing it through,” she added. “While a few trustees did the right thing, in many cases there were serious deficiencies in trustees’ dispute resolution processes and how they monitored and responded to complaints.

“ASIC will continue to closely monitor trustee compliance with RG 271 (regulatory guide 271). Where we identify serious compliance failures impacting consumers, we will take regulatory action, including enforcement action where appropriate, to address harm.”

ASIC selected 35 trustees for an initial review -- they reflected 38 funds with $1.5 trillion in assets across 16.5 million members -- followed by a more detailed review of a subset of 10 trustees. The regulator did not name the individual trustees or funds but said it canvassed a mix of industry, retail, public sector and corporate funds.

The report found there “were gaps” in how most trustees managed systemic issues that they could have identified through appropriate handling of member complaints.

It said after assessing information provided by 10 trustees in the second stage of the review, it found just half had clearly nominated who was accountable for serious issues identified in complaints. Only two of ten trustees had “relevant metrics” and were proactive in analysing data to identify, manage and remediate systemic issues.

In the second stage of the review just 3.3 per cent of 31,932 complaints by members were flagged as identifying a potential systemic issue.

A HESTA spokeswoman said the fund worked to continually improve member experience, including when there had been a dispute.

“HESTA has a robust IDR (internal dispute resolution) process that ensures members’ complaints are dealt with in a timely, fair and equitable manner.

“HESTA has industry leading 4+ star ratings on Product Review and Google Review, reflecting strongly positive experiences our members have with us.

“We have taken note of the findings from ASIC’s review, which covered 38 super funds, including industry, retail and corporate funds, and we will continue to identify any further improvements we can make to our complaints processes.”

Association of Superannuation Funds of Australia chief Martin Fahy said the industry would closely assess the reports released by ASIC to better understand the findings.

“ASFA supports efforts to improve complaint handling,” he said.

“We note in particular that funds will find the review of written responses to superannuation complaints (REP 752) to be a constructive report that provides some useful guidance as to how they can improve their written responses.”

The ASIC report said most trustees failed to ensure all complainants were kept informed when their response to an issue exceeded the maximum time frame of 45 days, and the review found a number of trustees did not respond to a “significant portion” of complaints in a timely fashion.

“Trustees’ internal reporting often lacked sufficient detail to identify, much less remedy, deficiencies in complaint handling,” the report said.

ASIC said it had “substantial concerns with the time taken by a small number of the trustees” it reviewed to deal with complaints and disputes.

“A high proportion of IDR (internal dispute resolution) responses going out late points to deficiencies in the overall IDR process or in resourcing or monitoring, as well as a failure to focus on the interests of members,” the report added.

It noted ASIC had written to five trustees included in the first stage of its review “to highlight areas for improvement”, while the regulator is also in the process of contacting trustees included in the second stage of the review regarding their compliance obligations.

“These trustees will need to take action to address any compliance concerns, and report back,” ASIC said.

The report highlighted that ASIC was considering “other regulatory action” where more serious concerns were identified.

Ms Press urged super fund trustees to improve their dispute resolution systems, which also had a bearing on how they managed risk.

“Having robust-end-to-end dispute resolution arrangements, designed with members’ interests in mind, is not a ‘nice to have, it’s a ‘must have’,” Ms Press said. “Trustees must prioritise investing in internal dispute resolution systems to meet their legal obligations.

“As well, effective complaints handling is an indicator of a trustee’s healthy approach to risk.”

In recent weeks, some AustralianSuper members were plagued by issues in accessing or transacting on their accounts due to an upgrade of a key portal and mobile phone app. “As a result of an increased number of members contacting us, it’s taking longer to speak with a consultant over the phone or via online chat. We’ve redirected all available staff to assist members but understand this may be frustrating and we appreciate your patience,” AustralianSuper told its members.

Sources said AustralianSuper was not one of the funds reviewed by ASIC regarding complaint handling and dispute resolution processes.

From next year, financial companies - including super trustees - must report internal dispute resolution data to ASIC every six months. In March, the regulator released mandatory requirements for dispute resolution reporting.