ASIC set to release report on super death benefit claims

ASIC is set to announce the results of its surveillance into how superannuation funds are handling death benefits claims in the coming months.

The regulator on Monday released its Enforcement and regulatory update (1 January to 30 June 2024), which sets out recent outcomes in enforcement and regulation.

“Superannuation is one of the most important, if not the most important, investment held by most Australians,” the report said.

“As more Australians approach retirement and need to access their hard-earned retirement income, we expect the superannuation and financial advice industries to do everything possible to promote informed and confident investment decision-making by members and, in particular, address conduct that inappropriately erodes members’ retirement savings.”

The report said that in February, it “called out” the risk to retirement outcomes for Australians whose superannuation remains in persistently underperforming investment options.

“We called on trustees, financial advisers, and advice licensees to more consistently focus on the performance of choice superannuation investment options. In May, we released the findings of our review into cold calling operators, who use high-pressure tactics to encourage inappropriate superannuation switching,” it said.

“Amid evidence of adverse consumer outcomes, we put the superannuation and financial advice sectors on notice to do more to protect members from these unscrupulous actors.”

Already this year, ASIC has examined the performance of choice investment options including the roles of trustees, financial advisers and advice licensees, and the product governance practices, including monitoring and decision making about performance issues, disclosures to consumers, and distribution practices.

Specifically, it reviewed the practices of 29 choice investment options and three legacy products offered by a selection of 10 trustees who were asked to identify their worst-performing options based on performance parameters provided.

These options and legacy products covered both the accumulation and retirement phases and of the 29 options, 24 options did not meet or exceed the performance benchmark disclosed in the Product Disclosure Statements (PDSs) for five or more years.

The review found there was often insufficient emphasis on and a lack of transparency about choice investment options that failed to meet performance expectations and little evidence of trustees communicating to members about investment option performance in a targeted manner. Additionally, financial advisers were not always addressing underperformance where relevant.

The regulator also issued a public warning after a review identified cold-calling operators using high-pressure sales tactics and online clickbait advertisements to lure consumers into receiving inappropriate superannuation switching advice.

It published Report 781 Review of Superannuation Trustee Practices: Protecting members from harmful advice charges (REP 781), which set out its key observations from its cross-sector work to deter cold calling for superannuation business models.

The regulator said that in the second half of the year, it will be focusing on a number of elements of the superannuation industry including updating the Regulatory Guide 276 Superannuation forecasts that involved calculators and retirement estimates (RG 276) to align with changes made to ASIC Corporations (Superannuation Calculators and Retirement Estimates) Instrument 2022/603.

It will also be publishing a report that summarises the findings from its review of how superannuation fund member services handle death benefits claims as well as its findings from its review of the scam prevention, detection, and response activities of selected superannuation trustees.