Superannuation Industry Stewardship Group key messages 9 March 2023

Welcome and introductions

The Chair opened the meeting, welcomed members, and reviewed apologies. No conflicts of interest were declared.

Integrity declaration

The ATO led a discussion regarding the introduction of an integrity declaration for members of all stewardship groups. The purpose of the proposed integrity declaration is for members to declare a trusted position within the stewardship group and confirm the obligation to act responsibly in this capacity. This annual declaration would be a reminder for members to ensure they keep integrity in focus.

Confidential consultation, while infrequent in the Superannuation Industry Stewardship Group (SISG), requires consideration as to how this can be appropriately managed. The ATO will continue discussions on how to approach this for the SISG and will consult further out of session on this matter.

Superannuation regulator updates

Treasury

Treasury noted the following areas of focus:

Legislating the objective of superannuation External Link– consultation has commenced and remains open until 31 March 2023.
Government has announced intention to reduce tax concessions for super balances greater than $3 million. Treasury will release a consultation paper on the implementation of this policy in the coming weeks. Roundtable discussions, bi-lateral conversations and working groups are expected.
Non-arm's length income consultation closed on 21 February 2023 with submissions under consideration and recommendations to be provided to the minister, The Hon Stephen Jones.
Your Future, Your Super review has been completed and advice provided to government.
Minister Jones announced a review of Managed Investment Schemes on 8 March 2023. Treasury is expecting to release a consultation paper in mid – 2023.
Quality of Advice Review has been provided to government. Treasury are assisting with the government response to the review, as well as making recommendations to how this will work in practice.

Australian Securities and Investments Commission

Following the release of the Australian Securities and Investment Commission (ASIC) Corporate Plan, work has commenced on the first phase, transparency – driving better transparency in industry. A new information sheet is under development, which will provide an overview of transparency obligations for superannuation trustees. Targeted consultation has been undertaken.

Other areas of focus include greenwashing, choice products surveillance, the retirement income covenant, and insurance in super. Updates are currently underway to guidelines and forms for reportable situations.

Recent media and content releases include:

SISG members are encouraged to read the article ASIC is watching superannuation funds’ advertising, published in the January edition of the Association of Superannuation Funds of Australia (ASFA) magazine. This article notes ASIC’s observations of superannuation advertising.
ASIC’s Indigenous Financial Services FrameworkExternal Link has been released, this will be discussed further at a future SISG meeting.
REP 758 Good practice for handling whistle-blower disclosuresExternal Link report released on 2 March 2023.

Australian Prudential Regulatory Authority

Key policy objectives over the next 12–18 months includes the objective to modernise the prudential architecture, a core strategic initiative to ensure the framework is clearer and simpler. Work is underway by Australian Prudential Regulatory Authority (APRA) to ensure all standards are aligned and are embedded with SPS 515 which will become the centre of the prudential framework. Consultation is planned for the second half of the year on the draft standard, relevant guidance, and materials.

Current and future consultation activity includes:

Superannuation transfer planning: Proposed enhancementsExternal Link closes on 10 March 2023. This paper recommends trustees enhance planning to ensure improved member outcomes when a transfer is required.
Prudential Practice Guide - Draft SPG 530 Investment GovernanceExternal Link is open for consultation until 17 March 2023.
Strengthening Financial Resilience in Superannuation PDF 0.97MBThis link will download a file (replacing SPS 114) consultation is open until 17 March 2023.
Draft Prudential Standard CPS 230 Operational Risk Management PDF 400KBThis link will download a file is being finalised, with consultation on associated guidance to commence in the first half of 2023.

Cross industry work is underway in relation to entities not meeting Information Security Prudential Standard CPS 234.

Work continues with ASIC on the implementation of the Retirement Income Covenant. A review of a sample of trustee’s retirement income strategies is underway, with a report to be released mid-year on the findings of this work.

APRA has published Supervision and policy priorities timelinesExternal Link.

Australian Financial Complaints Authority

From the 1 July 2022 to February 2023, approximately 1,800 superannuation complaints have been received by Australian Financial Complaints Authority (AFCA). A majority of these relate to members’ superannuation accounts, for example, complaints about fees, charges, incorrect insurance, rollovers. The remaining complaints relate to total permanent disability claims, oncome protection, and death complaints. These levels are consistent with previous reporting trends.

A prevalent issue AFCA notes is complaints around delays in complaint handing, which represents 37% of current claims.

There has been an increasing percentage of complaints resolved at complaint registration, in February 2023 this has reached 39%.

The AFCA member forum will be held on 16–17 March 2023, with a session on superannuation at 11:00 am.

AFCA are undertaking an IT transformation which will have impacts to AFCA members with the introduction of a new member portal.

There have been some new resources added to AFCA’s website.

ATO

The ATO concluded public consultation of the draft Tax Ruling and Practical Compliance Guide for worker classification in February 2023. The feedback received is under consideration, and work continues towards issuing final version of these products.

There has been data published recently that may be of interest to members:

Self-managed super funds: A statistical overview 2020–2021
Lost and unclaimed superannuation highlights there is currently $16 billion in lost and unclaimed superannuation
Compassionate release of super provides data on accessing early release of super on compassionate grounds, including how many applications received and approved in total and subcategories.

Environmental scan

Members provided updates on emerging priorities and issues for their market, including:

ASFA noted that they are focussing on ensuring people receive their correct superannuation guarantee (SG) entitlements and the importance of taking strong action when it is identified that these entitlements are not being met. Transparency is key.
The purpose of super is a hot topic – superannuation is for retirement, not early release or for housing. More work is required on ensuring equity in the system, that is, women retiring with 23% less in retirement savings than men.
Fraud continues to be a hot topic in this market. It is noted that work is underway regarding the risks to the system.
Chartered Accountants Australia & New Zealand noted that in addition to fraud, there are issues regarding elder financial abuse, and misuse of enduring powers of attorney. There is also the need for reform regarding death benefits and the use of binding nominations.
The proposed $3 million superannuation cap will only impact a small number of individuals, however, unintended consequences for members needs to be considered.
Is there further action required to protect superannuation in self-managed super funds (SMSFs)? Is there an opportunity to align regulations for SMSFs to those of APRA-regulated funds?

STP data use to address SG non-compliance

The ATO provided an overview of work underway to expand the use of Single Touch Payroll (STP) data to obtain better visibility of employees SG entitlements.

One key focus area from the 2022–2023 Corporate Plan is to expand the use of STP data. The ATO is looking at different ways to harness the benefits of STP data and member account transaction service (MATS) service reporting from superannuation funds, to ensure employees can engage with their super through better visibility of their SG payment.
As as 30 June 2022, there were 891,000 employers reporting super obligations through STP who employ approximately 13.6 million employees.
The ATO will match the STP data, and MATS reporting to determine if an employees’ entitlements have been met. Data from 1 July 2018 onwards will be used.
Having access to real-time information will assist the ATO to engage earlier with employers failing to meet their obligations, in line with the goal of prevention rather than correction and protect retirement savings for the community.
Accurate, complete, and timely information from both employers and superannuation funds will result in better quality data.
Existing compliance program activities will continue, new treatments will be determined once the data matching program matures.

Discussion noted:

This work is still in progress and will undergo rigorous testing of data sets. The current plan is to commence using the data from the start of the 2024–2025 financial year.
The employee notification process will still occur to ensure the ATO can investigate cases involving discrepancies in Ordinary Times Earnings or other complexities.

Internal dispute resolution

ASIC presented key findings from the release of REP 751 Disputes and deficiencies: A review of complaints handling by superannuation trusteesExternal Link.

When a member has an issue with their superannuation provider, the providers’ internal dispute resolution (IDR) process will deal with it in the first instance. It is important a trustee has a robust arrangement so members can be assured that their complaints will be dealt with effectively and efficiently.

ASIC encourages trustees to review and improve their IDR practices considering the findings in Report 751, learn from complaints and put members at the heart of their IDR process. ASIC recommends the following actions for good management of IDR obligations:

Have a dedicated process to manage delays, that is, making staff accountable to demonstrate genuine exception to exceed maximum response timeframes and make sure complainants are kept informed of delays.
Write IDR responses with the consumer in mind – refer to practical tips in REP 752: Review of written responses to superannuation complaintsExternal Link and give clear reasons for complaint decisions and any complaint handling delays.
Include AFCA’s details in the body of the complaint response (not just referred to in attachment).
Review resourcing in IDR teams regularly (monthly or quarterly).
Review complaint data to detect and fix wider problems.
Dedicated training and process to detect complainant vulnerability and fast-track urgent complaints.
Have sufficient detail in reports on complaints given to trustees to show any deficiencies in the timeliness and performance of the IDR process.

AFCA added that consumer protection is not being met if external dispute resolution (EDR) is not mentioned to the complainant as an option. There are also industry wide issues of IDR and EDR teams not being adequately resourced

Discussion noted:

There needs to be benchmarking for the timeliness of complaint responses across industries, that is, telecommunications or the government sector.
For benchmarking purposes, ASIC published a snapshot of complaints handling by superannuation trustees PDF 952KBThis link will download a file infographic in August 2022. This document notes that the average time to issue a complaint response is 24 days. 2.7% of all IDR complaint responses were issued after 45 days.

Fraud and cyber security

The initial findings for the Fraud and Security Working Group were presented to the SISG. Key highlights include:

The Fraud and Security Working Group was established following the November 2022 SISG. The group has convened 3 times to date.
The group has undertaken a high-level risk assessment, which has identified hotspots, vulnerabilities, and opportunities for improvement. This has involved working through case studies of real-life occurrences of fraud, to illustrate where the vulnerabilities are, and test where fraudulent activity can be disrupted.
The SISG supported the Fraud and Security Working Group continuing to the next phase of work. The working group will report back at the next session of the SISG in June 2023.

Attendees

Attendee’s list
Organisation	Member
ATO	Emma Rosenzweig (Co-chair), Superannuation and Employer Obligations
ATO	Larissa Evans, Superannuation and Employer Obligations
Association of Super Funds Australia	Glen McCrea
Australian Institute of Superannuation Trustees	Melissa Birks
Australian Prudential Regulation Authority	Mike Cornwell
Australian Securities & Investments Commission	Jessica Spence
Chartered Accountants Australia & New Zealand	Tony Negline
Financial Services Council	Spiro Premetis
Industry Super Australia	Ella Cebon
Link Group	Deborah Schembri
Mercer	David Knox (Co-chair)
SMSF Association	Peter Burgess
Super Consumers Australia	Xavier O’Halloran
The Tax Institute	Phil Broderick
Treasury	Lynn Kelly

Guest attendees

Guest attendees list
Organisation	Attendee
ATO	Belinda Black, Superannuation and Employer Obligations
ATO	James Barry, Superannuation and Employer Obligations
ATO	Joanne Cameron, Superannuation and Employer Obligations
ATO	Kylie White, Superannuation and Employer Obligations
ATO	Malcolm Allen, Superannuation and Employer Obligations
ATO	Michelle Allen, Superannuation and Employer Obligations
ATO	Shane Moore, Superannuation and Employer Obligations
Australian Financial Complaints Authority	Anne Maree Howley
Australian Prudential Regulatory Authority	Emily Langford
Australian Prudential Regulatory Authority	Emma Nicholson
Australian Prudential Regulatory Authority	Katrina Ellis
Australian Securities & Investments Commission	Julia Cakebread
Australian Securities & Investments Commission	Sacha Vidler
Australian Securities & Investments Commission	Violet Wong
COTA Australia	Alex Tewes
Super Consumers Australia	Rebekah Sarkoezy
Treasury	James Thomson

Apologies

Apologies list
Organisation	Member
ATO	Peta Lonergan, Superannuation and Employer Obligations
Australian Financial Complaints Authority	Heather Gray
Australian Prudential Regulation Authority	Carolyn Morris
Australian Securities & Investments Commission	Jane Eccleston
Business Council of Australia	Stephen Kirchner
COTA Australia	Patricia Sparrow
Law Council of Australia	Maged Girgis
Law Council of Australia	Michael Mathieson