ASIC cracks down on super funds failing vulnerable retirees
ASIC has slammed super trustees managing $1.14 trillion in retirement savings for failing to properly communicate with their members, particularly vulnerable retirees.
Corporate watchdog ASIC is cracking down further on the troubled $4.2 trillion superannuation sector with a new report showing trustees were failing to engage adequately with retirees, missing opportunities to unlock better retirement outcomes.
A review by the Australian Securities & Investments Commissions found superannuation trustees were failing to give the information that retirees needed to make confident and informed decisions when they leave the workforce.
The 25-page report comes after the failure of First Guardian Master Fund and Shield Master Fund, which have left thousands of investors exposed to heavy losses, collectively worth more than $1bn
ASIC is investigating super trustees involved in the funds and is suing ASX-listed Equity Trustees and Macquarie Securities over due diligence failures.
The ASIC review REP 818 – From superficial to super engaged: Better practices for trustee retirement communications, identified a lack of urgency in improving retirement communications among superannuation trustees collectively responsible for millions of members.
It found some trustees offered one-size fits all retirement communications aimed primarily at pre-retirees, missing opportunities to engage with members throughout retirement and provide more meaningful support.
ASIC Commissioner Simone Constant said that more than 1.5 million members are in the retirement phase now, collectively holding about $575bn in superannuation assets, and more than 2.5 million Australians will enter retirement over the coming decade.
“However, ASIC’s Moneysmart research suggests only one-third of Australians on the cusp of retirement are confident that they will be financially comfortable once they leave the workforce,” she said.
“It is important now more than ever for superannuation trustees to focus their attention on providing meaningful, and timely retirement communications to their members that can meet their needs.
“Moreover, members entering retirement typically hold larger balances, require more tailored solutions and expect high-touch support. Trustees that can meet these needs stand to unlock powerful commercial outcomes: stronger member retention, deeper engagement, and scalable growth.”
ASIC’s review also found little evidence of trustees tailoring their messaging and delivery methods to meet the diverse needs and preferences of their member base, including those already in the retirement phase.
“The clear message we are sending to super trustees is a one-size-fits-all communications approach won’t work for all member groups as it may not provide the quality of information customers need to make confident and informed decisions about retirement,” Commissioner Constant said.
“Most of these targeted communications were more relevant to members in the lead up to, or in early stages of retirement, which given the size of the retirement wave already breaking, is a real missed opportunity.
“It was disappointing to see the retirement communications practices of participating trustees largely overlooked the specific needs of First Nation’s members, vulnerable members and culturally and linguistically diverse members. None of the trustees we reviewed developed specific retirement communications for vulnerable members.”
The ASIC report provides detailed observations of good and poor practices from 12 participants since the end of last year.
The trustees reviewed are collectively responsible for more than 9.3 million superannuation member accounts and $1.14 trillion in member assets. Collectively, they represented 45 per cent of Australian prudential regulation Authority funds by member assets.
Commissioner Constant said effective data and research capabilities were critical in producing meaningful insights for driving strong member engagement, and removing barriers for vulnerable groups.
“However, we saw little evidence of wider processes in place to identify vulnerable groups and adequately support them with tailored retirement communications,” she said.
Commissioner Constant said it was concerning that one third of trustees did not have a formal process that considered member feedback.
“Super trustees cannot understand member needs if they do not have processes in place for identifying specific challenges faced by diverse groups, particularly the most vulnerable among us,” she said.
“Ultimately, our review found that trustees with robust governance, strong data and research capabilities and effective benchmarking are delivering better communications, and in turn supporting better retirement outcomes for their customers.”
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Originally published as ASIC cracks down on super funds failing vulnerable retirees
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