Superannuation Industry Stewardship Group key messages 11 September 2024

Welcome and introductions

Co-Chair David Knox welcomed members, opening the meeting with an Acknowledgement of Country.

The group welcomed new members Justin Micale from the Australian Taxation Office (ATO), Emily Martin from Treasury, Megan Fenner from the the Australian Prudential Regulation Authority (APRA), and Kirsten Samuels from the Financial Services Council. Former members Andre Moore from Treasury and Spiro Premetis from the Financial Services Council were thanked for their contributions. The group acknowledged that this would be the last meeting for Melissa Birks from the Super Members Council of Australia.

Roundtable with the Commissioner

The Commissioner of Taxation attended the meeting to hear from members on issues that are important to them and their clients.

The Commissioner noted the breadth of industry and regulators represented in the Superannuation and Industry Stewardship Group (SISG) and reflected on the growing importance and influence of the superannuation industry. As the super guarantee system and funds under management grow, super funds need to have a maturing mindset. Regulators need to ensure they are attuned to changes in the industry with the ageing Australian population discussed in the 2023 Intergenerational Report.

Additionally, the Commissioner highlighted upcoming changes in the policy landscape that will benefit individuals by ensuring they receive their super entitlements and observed that people are more engaged with their super in recent years.

The Commissioner also noted the ongoing threat of fraud and cybercrime. The ATO is aware of issues around financial coercion impacting vulnerable members of society and is working on appropriate strategies to address this behaviour.

Members provided their insights on key issues affecting the industry including:

• the benefit of the preservation age in the Australian superannuation system
• the growing complexity of regulations for super, which can complicate how an individual navigates the system
• an observation that practitioners believe the ATO are taking a firmer stance when addressing non-compliance
• the role of financial planners in the industry and how this differs from tax agents
• access to archived ato.gov.au content
• the importance of ensuring First Nations clients can access and interact with superannuation services, regardless of location or access to internet
• the YourSuper comparison tool
• the growing utilisation of data to address both unpaid and underpaid super
• complaint themes around notice of intent
• fraud in the industry.

Fraud and security

The group discussed how regulators and industry are continuing to address fraud and security concerns in the superannuation sector.

Australia's cyber threat environment

The Australian Signals Directorate (ASD) updated the group on growing threats as cyber criminals ramp up their efforts, especially since the COVID-19 pandemic. They emphasised the need for businesses to protect themselves and their clients and highlighted the support the ASD can offer to organisations and industry.

Key discussion points included:

• Cyber security needs to be managed like every risk within an organisation. Cyber criminals are motivated and can adapt to changing environments rapidly. Businesses need to be alert to cybercrime and actively protect their business and clients.
• Organisation leaders need to be aware of what their core business objectives are and how they need to be protected.
• Consumers expect businesses will protect their data, including implementing basic controls such as Multi-Factor Authentication (MFA), and having reasonable mechanisms in place to effectively detect and prevent cyber-attacks.
• Working together as an industry is key, using collective buying power in the industry to develop a solution and a standard.
• Best practice for strengthening cyber security involves adequate investment in security programs and governance, ensuring engagement with regulators, and engaging positively with legal and people risks.
• The ASD has a number of resources that can assist organisations to strengthen cyber security, including the Essential EightExternal Link mitigation strategies to help organisations protect themselves against various cyber threats; the Cyber Security Partnership ProgramExternal Link; and Exercise in a BoxExternal Link.

Member discussion

Key discussion points included:

• When dealing with fraud, the industry is only as strong as its weakest member.
• Following the COVID-19 pandemic, consumers have increased expectations around the protection of their data.
• The ATO emphasised the importance of verifying bank account details prior to making any payments from a super account.
• APRA has written to industry regarding the use of MFA and noted best efforts are measures that are in place before a cyber-attack.
• Organisations need to consider the effectiveness of different mechanisms in detecting fraud and scams.
• Artificial Intelligence is presents challenges and advantages in detecting fraud.

Industry bodies have developed resources to support their members, including the creation of mitigation policies and protective measures on high-risk transactions.

• The Financial Services Council presented FSC Standard No. 29: Fraud and Scam Mitigation Measures for Superannuation Funds, 1 July 2024 External Link(the Standard). The Standard contains key clauses on scam mitigation policies, oversight responsibilities, high risk transactions, opting out and communication. It came into force on a voluntary basis on 1 July 2024; however, it will become mandatory for Financial Services Council members on 1 July 2026.
• The Association of Superannuation Funds of Australia (ASFA) has developed ASFA’s Guidance on Minimum Fraud Controls for Superannuation FundsThis link will download a file to help members address some of the risks associated with the growing threat of identity theft and fraud in super. The guidance commenced on 1 July 2024, with a 12-month transition period for funds to finalise implementation by 1 July 2025.

Superannuation regulators

Treasury

Treasury provided an update on:

• Payday Super
• the retirement phase of superannuation consultation which occurred in December 2023–January 2024, with next steps under consideration
• Better Targeted Superannuation Concessions (Division 296) legislation in Parliament
• the Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial services regulatory framework in relation to financial abuse
• the implications of an election being called on any measures in progress.

Australian Securities and Investments Commission

The Australian Securities and Investments Commission (ASIC) Corporate Plan 2024–25 has been released, detailing several key activities involving super. These include:

• continuing to review member services, which is multi-year work, with a plan to publish findings to drive improvement in industry behaviour
• acting against misconduct resulting in the inappropriate erosion of super, including targeted enforcement against cold calling super switching models
• driving industry progress towards improving retirement outcomes, including monitoring trustees' implementation of the retirement income covenant.

Other work in progress includes encouraging millennials to engage with their super with a focus on education about how super works, how to check if employers are contributing the right amount of super, and how to consolidate accounts.

Australian Prudential Regulation Authority

APRA noted the release of its Corporate plan 2024–25External Link and the 2024 Annual superannuation performance testExternal Link. The Corporate plan sets out 9 strategic shifts for ongoing or heightened focus, which inform specific policy, supervisory and data priorities.

Policy priorities include finalising Prudential Standard SPS 114 Operational Risk Financial Requirement, commencing consultation on governance, consulting on Prudential Standard CPS 220 Risk Management to embed climate change financial risk, and reviewing the significant financial institutions definition.

Results for the 2024 superannuation performance test have been released, with all MySuper products meeting the benchmark. The consolidation of products has contributed to the decrease in failing products. A comprehensive package of super product performance metrics, data and insights will be published by the end of September 2024.

Australian Financial Complaints Authority

The Australian Financial Complaints Authority (AFCA) received over 7,000 super related complaints for the period 1 July 2023 to 30 June 2024, exceeding the total number received for the previous financial year. Complaints relating to super account for 7% of the total complaints received by AFCA.

Key points included:

• 42% of complaints were resolved following initial referral to funds, indicating internal dispute resolution processes may need to be strengthened
• 1 in 4 complaints related to a delay in claim handling
• most complaints related to super accounts (60%), followed by total and permanent disability claims (17%), income protection (13%) and death benefits (10%)
• 7% of complaints required an ombudsman to issue a decision
• comparing super complaints to other industries is difficult as people interact with their super providers differently to how they engage their banks.

A joint consultation process has commenced on the approach to sections 29(6) and 29(7) of the Insurance Contracts Act 1984 and the approach to delayed insurance claims in super. All feedback on these submissions should be sent to AFCA by 30 September 2024.

Australian Taxation Office

Downsizer super contributions data

On 10 September 2024, the ATO released data on downsizer super contributions, providing financial year data from the start of the measure on the number of people who have used the scheme, the average contribution, and demographics including usage by state, gender, and age.

Since 2018, 78,600 individuals have allocated $19.879 billion to super funds as downsizer super contributions. From 1 July 2023 to 30 June 2024, 13,000 individuals have allocated downsizer super contributions into their super funds. Of those 13,000 individuals, $3.382 billion has been contributed to super funds as downsizer contributions.

For further information, see Downsizer super contributions data.

Stapled super fund requests

Commencing 1 November 2021, the stapled super fund reform aimed to stop the creation of unintended multiple super accounts for employees. It is only required where an employee has not exercised choice to have their super paid to an existing fund or to an employer’s default fund.

Where an individual commences employment and does not provide a choice of super fund, employers or their authorised representative are required to request an employee’s stapled super fund details from the ATO to pay the employee’s super guarantee into.

As at 30 June 2024, there have been over 1,246,000 requests for stapled super funds processed by the ATO. An annual breakdown rounded to nearest hundred is:

• 1 November 2021 to 30 June 2022: 289,700 requests
• 2022–23 financial year: 554,600 requests
• 2023–24 financial year: 401,900 requests.

Additionally, 68.9% of requests were made by employers and 31.1% by agents or intermediaries.

At 30 June 2024, just under 14 million people had only one super account. This is around 78% of the super population. Less than 5% of the super population hold more than 3 accounts. For further information, see Trend towards single accounts.

Other business

Statistics on lost and unclaimed super for the 2023–24 year will be published on 17 September 2024. This data will be published annually in September.

Compassionate release of super and first home super saver scheme data for the 2023–24 year will be published by the end of October 2024.

The group discussed the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 and implications for self-managed super funds.

The ATO noted industry interest in developments regarding the use of data matching processes to support the monitoring of super guarantee compliance. This will be presented at a future SISG meeting.

Attendees

Guest attendees

Apologies list