ASIC warns superannuation funds failing to provide clarity to customers

Too many superannuation mission statements are overly broad or fail to hone in on the real needs of Australian retirement savers, the corporate regulator has warned.

ASIC’s review of the statements from retail, industry, corporate and public sector super funds found many were too general or failed to appropriately grasp their potential market.

Too many superannuation mission statements are overly broad or fail to hone in on the real needs of Australian retirement savers, the corporate regulator has warned.

The Australian Securities and Investments Commission made the call for superannuation trustees to tighten up their product design after wrapping up a review of 55 “target market determinations” from 27 funds.

ASIC’s review of the statements from retail, industry, corporate and public sector super funds found many were too general or failed to appropriately grasp their potential market.

The regulator warned funds that failed to make target market determinations more specific and detailed could face enforcement action. The determinations are statements funds are required to make when they issue a super product.

The statements are required to disclose who a product is designed for and what returns they may expect over a given period.

ASIC commissioner Danielle Press warned the regulator would take action against funds found to be failing on design and distribution obligations.

“Failure to review them regularly and take corrective action can result in harm if the product is inconsistent with the objectives, financial situation and needs of consumers in the target market,” she said.

“ASIC is now focusing on compliance with the design and distribution obligations, and we will move to enforce the obligations where necessary.”

Ms Press said the regulator was pleased with the quality of some determinations, showing the funds had a “comprehensive governance program”.

“However, others by their lack of specificity, raised questions about the underlying arrangements that trustees have in place to ensure their products reach the right consumers,” Ms Press said.

Target market determinations were introduced for all financial products under ASIC’s new design and distribution obligations.

However, they do not apply to MySuper products, defined benefit interests, or superannuation products that are no longer for issue or sale.

ASIC said trustees should better define the market, as well as clearly articulating what each product does and how its differentiates from others.

The regulator said some reviews made overly broad statements about time frames for investment objectives. This includes superannuation trustees failing to properly determine the kind of consumer the products would best fit, or the age range the products were designed for.

The regulator took issue with funds spruiking their products for “those wishing to save for retirement”, noting this was too broad to be meaningful.

Ms Press said trustees must focus on clarity and specificity when designing superannuation products.

“As product issuers, it is the fundamental responsibility of trustees to know their product offering and who it is right for,” Ms Press said.

“Trustees should clearly define their target markets and review triggers in target market determinations using objective, specific and measurable parameters.”