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Early release update
APRA’s latest update on COVID early release of superannuation data shows that profit-to-member funds have continued to receive the majority of early release applications.
Of the 1.59 million early release applications that were made by members between 20 April and 17 May, 72 percent were to profit-to-member funds.
Whilst 94 percent of all applications paid were within five business days, 96 percent of profit-to-member applications were paid within five business days.
Overall it has taken 3.3 business days on average to pay an application after receipt from the ATO.
In a response to questions on notice during the Senate Standing Committee on COVID-19, Treasury has also provided ATO demographic details on COVID-19 early release of superannuation as at 11 May 2020.
The treasury data shows that 57 per cent of early release applications were made by men, despite men being impacted less than women in terms of job losses during April. According to ABS Labour Force data, women made up 55 percent of the over 594,000 jobs lost in April,
The Treasury data also revealed that more than half of early release requests were made by members aged 35 and under. The highest proportion of requests both as a proportion of their respective population (over 13 percent) and as a proportion of applications (20 percent) were made members aged between 26 and 30.
30 percent of applications were requested by members in NSW, however on a per capita basis QLD and NT have more than 40 per cent of applications than the other States.
Meanwhile, Treasury this week released the latest data on total applications since the Scheme was introduced in late April. This data shows that a total of $14.3 billion in super has been accessed by 1.75 million applicants. The average amount of withdrawal is $8,172.
ATO considers way to tighten identify verification around SuperMatch
Following the suspension of SuperMatch due to identify fraud concerns, the ATO is exploring new approaches for customer verification, such as requiring customer identification prior to using the service.
In discussions this week with AIST and other industry stakeholders, it was noted that introducing Know Your Customer (KYC) checks prior to using SuperMatch is the best option for mitigating the risk and will result in the best outcome.
The expectation is that the appropriate customer verification controls are put in place prior to SuperMatch being used and funds have discretion as to when or at what stage of a process it would be best to do that. The effectiveness of the controls or solution would need to be able to be demonstrated to the ATO.
The ATO will be coming back to industry shortly with some guidelines regarding the appropriate level of KYC that will need to be in place before a fund can complete SuperMatch on behalf of a member. Note this is regardless of how the member joins the fund.
APRA on mergers: funds must demonstrate their ‘right to remain’
APRA has used the COVID crisis and its likely long-term impact on the superannuation and wider economic landscape to warn funds they need to be more proactive about mergers.
In a strongly worded message to the industry in the regulator’s latest Insight publication, APRA Executive Director, Sean Carmody lays out the regulator’s view on mergers, labelling many of the reasons provided to APRA as to why mergers had not occurred as “myths”.
While conceding that there were some valid reasons why mergers don’t go ahead, Mr Carmody said “many trustees appear to over-estimate the degree of difficulty and expense involved in the process, and under-estimate the benefits.”
“APRA's view is that there is a merger partner for all funds - it's just a matter of finding the right one," he said.
Noting that the super industry faced the challenges of declining returns, reduced membership and rising cost pressures, Mr Carmody said funds would need to continually reassess and be able to demonstrate their ‘right to remain'.
“For some the only way forward to secure the future of their members for the long-term may be to exit the industry and pass on the trusteeship of their funds to others who are better equipped for the task.”
According to APRA, resistance to mergers is not only confined to under-performing funds, with some better performing funds also putting potentially advantageous acquisition in the “too hard basket”.
APRA views 185 funds in the system as being too many and believes the industry is not operating with maximum efficiency.
APRA further suggests that all funds should be ‘periodically scanning the landscape’ for mergers so they can negotiate a merger on their own terms, rather than be compelled to undertake it because they have no other options.
Retirement income framework legislation deferred
The government has announced that it is delaying the introduction of the retirement income covenant due to the impact of COVID-19. The Retirement Income Covenant was previously scheduled to commence on 1 July 2020 and would require trustees to have a retirement income strategy in place.
The Retirement Income Covenant is stage one of the Retirement Income Framework announced in the 2018-19 Budget, the second stage the development of standardised, simplified disclosure for retirement income products.
Whilst AIST has previously supported the proposal to include a retirement covenant in the SIS Act, AIST believes that the subject of a default retirement product should be a matter for trustees, who are in the best position to determine what is in the best interests of their members.
The revised date for the commencement of the Retirement Income Covenant will be determined following further consultation.
Better member communication needed to remedy complaints: AFCA
AFCA has received more than 3100 complaints relating to COVID-19 since the pandemic was declared in March, with the complaints body urging financial entities to take more proactive measures in communicating with members to improve complaints rates.
The 3,180 COVID-19 related complaints included 1430 banking and finance complaints (with 680 of these relating to financial difficulty), 1070 general insurance complaints, and 610 superannuation complaints.
The majority of the complaints related to loan break costs, disputed transactions, requests to extend payment terms, denial of travel insurance claims and early release of superannuation.
AFCA used a recent industry consultation to urge financial firms to provide early, proactive communication with consumers to combat the increase in complaints.
“Many of these complaints result from poor communication, where a consumer has trouble contacting their firm, does not understand their policy, or is confused about the information they receive,” said AFCA Chief Operating Officer Justin Untersteiner.
AFCA anticipates receiving more financial difficulty complaints in the next six to 18 months.
“We expect to see more complaints from vulnerable consumers or others who struggle to repay mortgages or other debts as Government and sector support initiatives come to an end,” Mr Untersteiner said.
“We encourage financial firms to minimise COVID-19 related disputes by communicating with consumers early, speaking in plain English, proactively setting customer expectations around delays, reviewing internal dispute resolution processes and regularly engaging with AFCA.”
Deferral of RG97 requirements confirmed by ASIC
ASIC is deferring the transition to new RG97 fees and costs disclosure requirements for PDSs, allowing entities to come into the new disclosure regime between 30 September 2020 and 30 September 2022.
ASIC updated its COVID-19 Frequently Asked Questions (FAQs) to reflect the changes. Previously, the requirements were due to apply to all PDSs issued on or after 30 September 2020.
There will be no change to the periodic statement transition arrangements, which entities must comply with new requirements for reporting periods commencing 1 July 2021.
Consumer Data Right accreditation open
The ACCC has launched the Consumer Data Right Register and Accreditation Application Platform (RAAP) and the Consumer Data Right Participant Portal which will enable businesses to apply to become Accredited Data Recipients.
The launch includes the release of CDR Accreditation guidelines and follows the release of Consumer Data Right Rules that came into effect 6 February 2020.
If an organisation wants to be able to receive CDR data (following member consent) it will need to be accredited by the ACCC. To do so, the organisation will need to demonstrate that it:
AIST has previously supported the recommendation of the Productivity Commission into Superannuation Efficiency and Competitiveness, which recommended that ‘The Australian Government should automatically accredit superannuation funds to be eligible to receive (following member consent) information held by banks under the Open Banking Initiative’.
Sharing of banking data securely between major banks and initial Accredited Data Recipients will commence on 1 July 2020.
For further information please contact AIST’s Policy Analyst, Zach Tung at email@example.com
Design and Distribution Obligations formally deferred
ASIC have released its instrument formally deferring the Design and Distribution Obligations commencement date until 4 October.
Following on from a previous announcement about a delay to the DDO measures, the ASIC Instrument officially exempts any person who is required to make a target market determination from all provisions of Part 7.8A of the Corporations Act 2001, until the end of 4 October 2021.