The Australian Securities and Investments Commission (ASIC) has pulled up superannuation trustees on their efforts to consolidate duplicate member accounts after a review found poor practices in both industry and retail funds.
ASIC’s review of nine trustees assessed how they are meeting their obligation to annually identify and automatically consolidate duplicate member accounts within a fund to minimise payment of unnecessary fees.
According to data from the Australian Taxation Office, there are some 3 million people with two or more super accounts, which includes a portion of members holding duplicate accounts within the same fund.
“It shouldn’t take an ASIC review for super trustees to comply with the law. We are concerned about some of the failures uncovered in our review and are considering other regulatory action for more serious concerns,” said ASIC commissioner, Danielle Press.
“We expect all trustees to closely review their policies and procedures against the issues identified and take immediate steps to close the gaps.
“We will continue to monitor how trustees are consolidating duplicate accounts. Where we identify serious failures impacting consumers, we will take enforcement action where appropriate.”
With duplicate accounts, there are concerns from ASIC that super fund members unintentionally pay multiple sets of fees, including insurance premiums.
Press added: “Trustees should be proactively merging duplicate member accounts within the fund to not only help their members avoid extra fees but also to ensure their funds avoid costly remediation in the future.
However, our review highlighted that they are not doing enough.”
It found three of the nine trustees lack documented business rules for identifying and consolidating multiple accounts on an annual basis across some or all of their funds. The others had rules and policies in place, with annual checks, however, ASIC found that some trustees had rules that exclude certain cohorts of members when it should apply to all fund members.
Following ASIC engagement, all nine trustees either have, or will have, documented processes that apply to all members. Five trustees are undertaking the matching process on a monthly basis, or moving to do so, with three more undertaking it at least quarterly.
Eight of the nine trustees undertook some form of best interests assessment across one or more of their funds.
One of the trustees determined that, regarding the nature of their fund’s products, it would never be appropriate for a member to maintain multiple accounts and therefore automatically merged all duplicate accounts.
The trustee that failed to undertake any best interests assessment has committed to rectifying this practice.
The review noted most trustees contact members about duplicate accounts even though they are not specifically required to do so. Six sought direction from their members to check if consolidation was in the member’s best interests and all trustees notified at least some members if a duplicate account was identified.
Two trustees with multiple funds did not have an internal policy on consolidation of duplicate accounts, instead relying on the administrator to have a process in place. However, one trustee required monthly reports from their administrator detailing the volume of duplicate accounts and a commitment to keep the number of duplicate accounts below a certain threshold.
ASIC’s review also found that three trustees had a process to check for existing accounts on account creation.
Following engagement with the corporate regulator, all trustees with poor practices have committed to improvements to address these raised concerns.
Earlier this week, an ASIC review of 12 superannuation trustees found all but one failed to ensure their practices or disclosure aligned with their obligations in dealing with member funds.
The regulator called on super trustees to ensure they meet legal obligations for dealing with incoming money from consumers if a new or increased interest in a super product cannot be issued by the next business day.
Following the review, all trustees with deficiencies took action of some kind, including paying remediation, notifying ASIC of a reportable situation, implementing changes to deal with application monies to become compliant, or improving disclosures.
