COVID-19 challenges for super funds
COVID-19 pandemic and associated government policy has provided challenges for the superannuation industry, particularly for trustees to provide appropriate information. ASIC has recently outlined its interim corporate plan, which includes protecting consumers from harm at a time of heightened vulnerability. This includes ensuring that trustees are communicating effectively with members on issues. While ASIC notes that a range of regulatory activities has been postponed, trustees’ compliance and legal obligations remain unchanged.
The COVID-19 pandemic has presented some of the toughest challenges to businesses and the economy in recent memory. No surprises then that the superannuation industry has also been heavily impacted both in terms of early withdrawal of super and in investment opportunities. In the context of an uncertain future, ASIC has released information about what it expects from super funds including SMSFs, in order to provide a semblance of certainty to trustees.
“Trustees cannot be complacent when it comes to the role of superannuation in Australia. We should reflect on what the past few months have taught us and continue to adapt and evolve. The continued success of the superannuation system in Australia relies upon your next steps.” – Jane Eccleston, ASIC’s superannuation senior executive leader
Under ASIC’s interim corporate plan, it has listed protecting consumers from harm at a time of heighted vulnerability and continuing to identify, disrupt, and take enforcement action against the most harmful conduct as two of its priorities. It notes that while it has postponed a range of regulatory activities to allow trustees to focus their resources and attention on responding to the pandemic, trustees’ compliance with legal obligations remain unchanged.
Some of the issues ASIC has recently looked at including early release modelling, disclosure requirements, and insurance within super. In relation to insurance in super, it noted that trustees should communicate with member about the potential loss of insurance in certain circumstances where individuals accessed their super early. According to ASIC, in many cases it found there was little detail on how members’ insurance through their super may be affected. Therefore, ASIC encouraged super funds to direct clear and personal communication on how early access affects insurance cover including the options to reinstate cover.
To further support individuals making informed decisions about the early release of super, ASIC reminded Australians that it has made changes to facilitate access to free and affordable advice with either financial advisers or within super funds. This includes:
allowing advisers to give a Record of Advice (ROA) instead of a Statement of Advice (SOA) to clients when providing advice about the early release scheme;
permit registered tax agents to give advice to existing clients about the early release scheme without needing an Australian Financial Services (AFS) licence; and
take a no-action position to allow super fund to more readily provide “intra-fund” advice in relation to the early release scheme.
Note that while the no-action position allows for a broader range of matters to be considered in the context of advice, such as matters relevant to the member’s financial position and household circumstances, it can only be initiated by the member proactively seeking advice of this kind. ASIC says that trustees should not be the ones to initiate this conversation.
Further, ASIC notes that it will continue to work in conjunction with other agencies such as the ATO, ACCC, AFP, AUSTRAC and APRA to monitor the current environment where there is an increased risk of member harm from fraud and scams. Monitoring of this kind is not expected to be limited only to early release of super.
Need advice on your super?
If you need advice on superannuation matters including the early release scheme, you may be able to go to your trusted tax adviser for affordable advice. Otherwise, you could also approach your super fund for intra-fund advice which may be free.