Problems persist with PYSP communication: ASIC

ASIC said that common problems have been persistent in its review of superannuation trustees' PYSP communication with members, with some trustees failing to present facts and instead focusing on member and insurance retention.

The regulator launched the review last year because of concerns that unbalanced trustee communications could undermine the effectiveness of the PYSP Act in producing benefits for members.

The report presents findings from ASIC's review of a broad range of communications material from 12 superannuation funds with six million member accounts.

The regulator said the funds were chosen on the basis that, because of their relatively high number of inactive accounts, they were likely to be considerably affected by the PYSP reforms.

Issues identified include bare minimum messaging to simply meet compliance requirements, failure to explain the reforms, failure to highlight the impact of account proliferation, influencing of members to make certain decisions, and the use of just one channel to communicate with members.

ASIC commissioner Danielle Press said a superannuation trustee's approach to member communications is critical for the success of the PYSP reforms.

"Our review found some good member communication. However, there were some common problems with the material we reviewed, which suggested trustees are not always sufficiently focused on their members' needs," Press said.

The regulator said come of the material it reviewed did not provide sufficient context for the reforms or adequately explain what the changes meant for members.

ASIC said some of the reviewed material used complex language, promoted a particular option that may not have been suitable for the member or failed to include relevant information about the member's existing superannuation arrangements that "would have been helpful".

"Many Australians, including those targeted by the PYSP reforms, are not engaged with their super - it is unclear which piece of communication a member may read," Press said.

"So it is all the more important for trustees to get their communications right. They must ensure that their members are not exposed to unbalanced messages in any communication they receive."

Jason Ross, head of superannuation research at Rainmaker, said that while the review is quite positive there were some concerning factors.

"Overall the review was relatively positive, however, when call centre staff say that insurance premiums are not paid from your back pocket it shows a lack of understanding of the customer-value-proposition of super," Ross said.

"Super is your money. Premiums are deducted from your future retirement savings."

Press said to implement the reforms effectively; trustees need to take a member-centric approach to designing and delivering their PYSP communications.

"They must ask themselves: Will this approach help my members make decisions in their interest?"

"We are reminding trustees to balance their focus on their own operational priorities, such as growing the number of member accounts or maintaining certain insurance arrangements, with ensuring benefits for those members targeted by the PYSP reforms," she said.

Xavier O'Halloran, Super Consumers Australia director has called on superannuation funds to do more to inform customers appropriately.

"Superannuation funds need to do much better when communicating with members. There was evidence of people being railroaded into keeping insurance which may have been useless," O'Halloran said.

"As the Productivity Commission found the cost of insurance can set members retirement balances back by around $85,000. Super funds need to be very careful that they are not driving people to keep costly inappropriate cover."

"We're calling on super funds to take heed of ASIC's findings. This is their chance to improve, next time we'll be encouraging the regulator to take enforcement action."

The regulator has not 'named and shamed' any funds, and said it will provide direct feedback to each individually.

"We encourage all trustees to revisit their member communications in light of our review and consider whether they are providing clear, accurate and actionable information about the PYSP reforms," Press said.

"Communication with members about such important matters should not be treated as a compliance exercise."

The regulator said it will continue to monitor trustee communications in relation to PYSP and related reforms and consider taking regulatory action where further issues are identified.

Read more: ASICDanielle PressJason RossSuper Consumers AustraliaProductivity CommissionPYSP ActRainmakerXavier O'Halloran
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