POWERED BY MOMENTUM MEDIA
AFCA funding can lead to poor super outcomes
The Australian Financial and Complaints Authority (AFCA) is reviewing its funding model as feedback from members such as superannuation funds have cited their contribution can lead to poor super member outcomes.
AFCA chief operating officer, Justin Untersteiner, said in a speech that the authority was reviewing its funding model to ensure it was cost-effective, fit-for-purpose and sustainable.
“Over the past 12 months, we’ve received some feedback about the current design. For instance, today the superannuation industry pays a levy which is based on the size of the asset pool they have under management,” Untersteiner said.
“Some superannuation members have told us that this can lead to poor outcomes, for instance, a trustee who has a large asset base, but a wonderful system that leads to minimal complaints may be paying a much higher levy than a trustee with a smaller asset base but who has terrible systems and a high number of complaints.
“We have also had feedback from some of our smaller members who don’t receive many complaints at all, but when they do receive a complaint, particularly one that goes to Determination, the cost can hurt and can seem disproportionate to the issue at hand.”
The current interim funding model was a hybrid model based on aspects of the former Credit and Investments Ombudsman (CIO) and Financial Ombudsman Service (FOS) scheme funding arrangements and the Australian Prudential Regulation Authority (APRA) levy model for superannuation trustees.
The model had been operating since AFCA replaced the FOS, CIO, and Superannuation Complaints Tribunal (SCT) in 2018, and was intended to operate for the first three years of AFCA operations.
Untersteiner said AFCA brought in PwC to support a forensic review of the current model and to assist in development of options.
“AFCA will ensure the funding model we develop is commercial, proportionate and equitable across our member base,” he said.
Untersteiner noted in reviewing the funding model, AFCA had developed a set of principles to guide any future funding model design. These principles were:
- The model will incorporate incentives to resolve complaints early and, as appropriate, reflects attributes of a user-pays approach;
- The model will seek to minimise direct sectorial cross-subsidisation to the extent practicable;
- The model will be funded by industry through a transparent process;
- The model will be free for consumers; and
- The model will provide funding for community engagement, including outreach activities to raise awareness amongst consumers, in particular vulnerable consumers, and financial firms.
Recommended for you
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
