To date, the implementation of Protecting Your Super (PYS) and Putting Members Interests First (PMIF) legislation has been a long and winding road and this will continue, with even more twists and bends, as the next round of changes come through.
The last two years have seen a myriad of changes to superannuation and its affiliated insurance but in the words of Billy Ocean ‘when the going gets tough, the tough get going’. It’s been great to see the industry take on these changes, to prioritise and protect members’ interests, with focus and determination. The year ahead will be one of the toughest yet, so let’s have a look at what’s coming up in regards to insurance in super.
Oct 2020APRA SPS 515 Strategic Planning and Member Outcomes: annual performance assessment to determine whether the financial interests of the members are being promoted; Federal Budget implications; next round of ATO auto-consolidation (PYS).
Dec 2020 Implementation of various FSRC related legislation: enforceability of industry codes (eg. Insurance in Super Code of Practice), Insurance Claims handling to become a financial service; Universal Terms for Insurance in MySuper.
Mar 2021APRA SPS 250 Insurance in Superannuation: requirements with respect to making insured benefits available to beneficiaries; Compliance with ASIC REP633: requirements set to provide improved consumer protections which many funds will be able to meet as they renegotiate their insurance policies.
Apr 2021Design and Distribution Obligations and Product Intervention Powers Regime: Issuers and distributors required to have an adequate product governance framework to ensure products are targeted at the right people (this regime will affect almost all areas of the financial services industry).
Jun 2021Insurance in Super Voluntary Code of Practice becomes binding and enforceable and funds must have transitioned and be compliant before this date.
Oct 2021ASIC REG271 Internal Dispute Resolution: financial entities must meet ASIC’s standards and requirements for Internal Dispute Resolution systems and have an AFCA membership.
Dec 2020-21Financial Accountability Regime: extension of accountability requirements to other APRA-regulated entities and directors/senior executives in accordance with the government’s response to the FSRC recommendations.
OngoingAFCA implementation and compliance
UnknownPotential creation of a co-regulatory model for industry codes: Under a co-regulatory model, industry participants would be required to subscribe to an ASIC approved code and, in the event of non-compliance with the code, an individual customer would be entitled to seek appropriate redress through the participant’s internal and external dispute resolution arrangements.
As well as ensuring compliance and implementation of all regulatory and legislative changes, super funds will still be dealing with the continuing ramifications of COVID-19. IQ remains focussed on helping our clients navigate these changes and cut through the complexity of the year to come, supporting them to achieve the best outcomes for their members.
The insurance world keeps turning and regulations and standards are constantly evolving, but members still need their insurance and funds must continue to put members interests first, in everything they do.
By Kiara Leslie (Graduate Consultant) and
Sharon Campanaro (Principal Consultant and Head of Change and Learning Services)
“Every system is perfectly designed to get the results it gets.” Donald Berwick
With the release of the Retirement Income Review (RIR) expected soon, let’s take a moment to reflect on why it’s so eagerly awaited and what it might mean, particularly for those in the superannuation industry.
Despite the RIR being delivered to Government back in July and the Federal Budget due to be delivered within three weeks, no date has been announced for its public release or when Government will provide comment.
The objective of the RIR is to establish a fact base of the current retirement income system that will improve understanding of its operation and the outcomes it is delivering for Australians.
The COVID-19 pandemic did not change this objective, but certainly added an extra layer of complexity that Government will need to consider prior to offering any commentary. However, while the industry awaits the report’s release, speculation is growing about what it contains. The longer the delay, the more time groups have to campaign in the media on several topics, including the hotly contested Superannuation Guarantee (SG) increases and early release scheme for first time home buyers.
According to the Grattan Institute, just over 50% of submissions on the RIR related to superannuation and 30% related to the Aged Pension. Of course, for many, superannuation is synonymous with retirement and it is on the super component that I will comment on in this post.
It is on proposals for ongoing superannuation early release that Australia needs to tread lightly. It would be irresponsible to break open the piggy bank for purposes other than the intended purpose of catering for an adequate retirement income. If this becomes the norm, many retirees may become fully dependent on the Aged Pension which will not only impact their quality of retirement but also place unnecessary strain on the system. And down the rabbit hole we go.
Despite strong economic growth and investment returns over the past 28 years that enabled a comfortable retirement (for some), the calls to keep SG flat need to be considered (and then be rejected) against the backdrop of an aging population (16% of the population is now over 65); increased life expectancy; changes in home ownership that means retirees are more likely to carry mortgage dept at retirement; low wage growth; and low returns on fixed interest investments impacting savings for retirement. Also, let’s consider for a moment, that retirement provisions for low and middle income households are more likely to feel the negative impact of static wages and low fixed investment growth than those who were able to fully partake in the 28 years of growth.
Australia’s retirement income system is the envy of many around the world. The RIR is timely and the objectives noble. In times of crises (like the current pandemic) we should be practical rather than align purely to some aspirational system. That said, let’s hope that interpretations of the RIR Committee’s observations, and subsequent implementation by Government, remains true to the purpose of the superannuation system and aren’t based on populist choices just because it is easier in the short term.
Australians deserve a robust system that can tick the boxes of adequacy, equity, sustainability and cohesion and we look forward to seeing how the Government will place the sign posts for the industry to achieve this. IQ are ready and waiting for the report’s release and look forward to working with clients to deliver the results, improve the system and ensure we stay well and truly away from the rabbit hole.
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