ASIC warns super funds on insurance messaging
It is not appropriate for superannuation fund trustees to encourage all members to maintain insurance in circumstances where many members with inactive accounts will be better off allowing the insurance to lapse, according to the Australian Securities and Investments Commission (ASIC).
ASIC commissioner and former industry superannuation fund chief executive, Danielle Press delivered the message as part of ASIC’s guidance around how superannuation funds should deal with the Government’s recently enacted Protecting Your Super Package legislative changes.
Press said that, similarly, trustees should not be urging all members with low-balance accounts to keep their account within the fund as this may not be in the best interests of members.
The warning is significant because it comes at a time when a number of superannuation funds have been developing communications strategies, which it part warn members about what is at risk if they fail to opt-in to insurance inside superannuation.
What is more, Press put superannuation funds on notice that ASIC would be closely monitoring communications around the legislative changes and was ready to take action if it believed members were being misled.
“How a trustee communicates with their members about the PYSP changes will give us an indication of the trustee’s commitment to members’ best interests,” she said.
ASIC yesterday pointed out the changes contained in the Protecting Your Super Package legislation including:
- Insurance will be opt-in for members whose accounts have been inactive for 16 months.
- Fund members with balances under $6,000 whose accounts have been inactive for 16 months will have their accounts paid to the Australian Tax Office (ATO). The ATO will take proactive steps to consolidate this with the members’ active super fund.
- Fee caps will be imposed on certain fees for account balances under $6,000.
- Exit fees will not be charged for moving money from a superannuation account.
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An ASIC review has identified superannuation trustees are demonstrating a “lack of urgency” around improving their retirement communication and still taking a one-size-fits-all approach.
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It's time to get rid of ASIC & APRA and form one regulator with less public servants and more professionals who have some knowledge of the financial services sector to be able to put in place proper and sensible reforms so that those involved understand what the system represents instead of having to listen to and read about how 'the big policeman is coming to get you' no matter whether innocent or not.
I am sure the ASIC and APRA executives will be there for the young person who falls off their jetski at high speed and becomes totally and permanently disabled but has no insurance. After all, they are so much better off because they didn't pay all those nasty "fees" in super for their insurance.