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791 COVID complaints about super
The Australian Financial Complaints Authority (AFCA) has received 791 COVID complaints about superannuation in the past 12 months, most of them relating to early release super.
In a snapshot of the 2019/20 financial year, AFCA has revealed the number of complaints equate to less than 0.03 per cent of the 2.4 million applications for early release since the COVID scheme opened in April.
AFCA CEO David Locke said AFCA had received a total of 4,773 complaints relating to COVID-19 with about 20 per cent of these related to financial difficulty. This was less than AFCA expected, an outcome that Mr Locke attributed to the proactive response taken by financial firms.
Looking ahead, AFCA anticipates seeing more financial difficulty related COVID-19 complaints over the next six months as government support, such as JobKeeper payments are wound back, along with the end of initiatives such as a ban on rental evictions, and mortgage pausing.
Overall, AFCA received 80,546 complaints during the 12-month period, with most complaints about credit, insurance claims and superannuation.
Out of this total, AFCA resolved 78 per cent of cases, with a majority being settled in 60 days or less. 73 per cent of complaints were settled by agreement or in favour of the complainant, with banks being the most complained about financial institution. Most complaints were about credit, insurance claims, and superannuation.
More information about AFCA’s operations for the financial year will be made available in AFCA’s 2019/20 Annual Review, scheduled for release in the second half of 2020.
Early release by the numbers
As the second tranche of the government’s COVID early release scheme kicks off, APRA data shows that more than 2.4 million Australians have accessed their super through the scheme.
According to the latest round of data released from the regulator - which covers up to the week ending June 21 - the total amount of super paid out sits at $17 billion, with an average payout of $7,492.
Given that a significant number of young members have drained their super accounts in the first round of the super scheme, most funds are expecting a lower number of applications during the second round.
That said, demand was high when the second round of the scheme opened on Wednesday and a rush of applicants contributed to an outage of the ATO’s online services portal.
An hour into the new financial year, many applicants found they could not access the service. The large volume of traffic was also attributed to the number of Australians attempting to lodge their tax returns.
The ATO says it has identified where the system failed and is working to fix the issue. In the meantime, some users can access the online services without issue, while others are receiving a message asking them to try again later.
APRA takes action against retail fund delays in transferring members to MySuper
APRA has imposed a new RSE licence condition on Colonial First State Investments Limited (CFSIL) and Suncorp Portfolio Services Limited (SPSL) for delaying the migration of members into lower fee MySuper products until just prior to the legal deadline.
While APRA’s investigation did not conclude that the funds had breached the SIS Act, the investigation raised concerns about the adequacy of their internal processes for demonstrating how members’ best interests were considered and prioritised.
Going forward, both funds will be required to record how they consider members’ best interests and members’ priority covenants when making decisions that materially affect their interests.
The action is stems from the final report of the Financial Services Royal Commission, in which Commissioner Kenneth Hayne asked APRA to investigate the funds for their delay, in addition to two other transgressions:
Heatmap shows $110 million fee reduction across MySuper
As outlined in AIST’s policy alert earlier this week, APRA has released an updated version of its MySuper fee and performance Heatmap, focussing on the fees and costs across the cohort of APRA-regulated entities.
The total fees and costs disclosed have decreased overall across MySuper products since publication of the first Heatmap in December 2019. According to APRA, more than 40 per cent of MySuper members have seen a reduction in fees, a collective saving of $110 million a year.
Areas to see little change in the six-month period include administration fee structures which have remained mostly unchanged across MySuper products. The Heatmap has also indicated that MySuper products charging relatively high fees and costs in December 2019 continue to have relatively high fees and costs.
AIST member funds continue to perform well compared with the rest of APRA-regulated funds, averaging lower admin fees and lower total fees.
APRA has not yet updated the sections of the Heatmap focused on investment performance and sustainability because material changes in those areas are expected to take longer to manifest.
APRA has noted it will be writing to the trustees of more than a dozen MySuper products that continue to seriously underperform on fees.
AIST has continued to advocate for the Heatmap to be extended to Choice products, given that the weight of retail super assets is in the Choice sector, where – according to Productivity Commission findings - there is a long tail of underperforming retail funds.
APRA says it is progressing plans to expand the Heatmap to cover Choice products and insurance but has released no further details at this point.
Covid could cost young workers $7 billion in lost wages
The COVID-19 recession could cost young people up to $7 billion in lost wages over a decade.
New research conducted by EY shows the average 21 year old entering the workforce is likely to miss out on up to $32,000 over a decade, and that workers aged 18 - 23 years could have $22,000 less to spend on a home and $30,000 less in retirement savings.
With 90 per cent of a worker's income growth occurring in the first decade of their career, young people entering the workforce during a recession will have their long-term earnings severely impacted.
EY stated young people are facing an incredibly heavy economic burden during this pandemic - with many not only facing a reduction in earnings, but the complete loss of work.
Two-thirds of Australians back SG rise to 12%
A new poll has revealed that support for the legislated rise in the super rate to 12 per cent remains strong, with two out of three Australians of working age backing the plan amidst the Covid economic downturn.
A UMR poll of 1,770 working age Australians with super, commissioned by Industry Super Australia (ISA), reveals nationally two thirds (67 per cent) want the government to stick to the legislated plan to incrementally lift the rate of super paid on top of wages from 9.5 per cent to 12 per cent.
Over three weeks in May and June, the UMR poll asked respondents if the economic circumstances meant the super increase should be ditched or proceed as planned.
A majority backed the increase in all states, all capital cities and across all regions - including Brisbane and regional and rural Queensland.
The super rate is scheduled to go up from 9.5 per cent to 10 per cent next year, then 0.5 per cent each year until it reaches 12 per cent by 2025.
SG regulation amendment to account for aged care bonus
The Superannuation Guarantee (Administration) Regulations 2018 have been amended to ensure that an employer is not required to make additional superannuation contributions as a result of a bonus payment paid to an employee under the Aged Care Workforce Retention Grant Opportunity.