If the Government wishes the Insurance in Superannuation Voluntary Code of Practice to become mandatory it has the ability to legislate the outcome, according to the Association of Superannuation Funds of Australia (ASFA).
The ASFA has used a submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to defend the code as “an important and noteworthy achievement, which already has played a significant role in lifting standards across the industry to benefit fund members” but acknowledged calls for it to become enforceable.
“In regard to this ASFA notes that an option would be for the Government to legislate the Code provisions, or for a regulator such as the Australian Prudential Regulation Authority (APRA), given its standard making power and existing role in supervising insurance in superannuation, to mandate the Code through a prudential standard,” the submission said.
It said that should the decision be made to give legislative recognition to an industry-based code of practice it was critical that, unless the code had been approved by a regulator, such recognition should only take place following consultation with the industry.
“A reasonable transition period should be provided to allow sufficient time for industry participants to implement any changes that may be necessary to comply,” it said.
“ASFA recommends that, if the Code were to be mandated, the existing ‘if not, why not’ approach should be maintained so that trustees are able to exercise discretion, where needed, in order to act in the best interest of their members,” the submission said.
It said that ASFA would undertake further consultation with the other Code owners over the coming months to discuss possible next steps and would continue to explore with the Government, regulators and other decision‐ makers options to strengthen the Code.