A recent ASIC survey of registrable superannuation entities (trustees) about their preparedness for the new enforceable internal dispute resolution (IDR) obligations has identified some important areas requiring further work.
Following the survey, ASIC engaged with individual trustees to understand in more detail the steps taken in their preparation. ASIC undertook this work to assist trustees with their preparations for Regulatory Guide 271 Internal dispute resolution (RG 271). RG 271 establishes new standards and requirements for how all financial firms will need to deal with consumer complaints from 5 October 2021.
ASIC Commissioner Danielle Press said ‘IDR is an integral part of the consumer protection framework in Australia. Consumers are entitled to expect that their complaint will be heard within a reasonable timeframe and they will be treated fairly’.
‘How superannuation trustees treat complainants, and learn from complaints, is a true indicator of whether their funds have a culture of putting member’s interests first. It also provides insights into the maturity of a trustee’s approach to risk.’
While many trustees in ASIC’s survey are taking significant steps to uplift their handling of consumer complaints in the lead up to the new requirements, ASIC has identified some important areas requiring additional effort:
- attention to governance arrangements;
- application of the expanded definition of ‘complaint’;
- implementation of the new maximum timeframes for IDR responses;
- identification, ownership and reporting of systemic issues; and
- data capture and integration.
‘We encourage all trustees to assess their preparedness for RG 271 in light of these findings. From 5 October 2021, key parts of the IDR requirements are enforceable. ASIC will take a reasonable approach in the early stages provided trustees are using their best efforts to comply,’ Ms Press said.
Areas for improvement
Governance
At the time of the survey (refer Background), 29 per cent of the trustees surveyed had not briefed their boards on their obligations under RG 271. This raises concerns about whether the enforceable requirements are being sufficiently prioritised. Many superannuation funds are likely to require significant changes and investment to comply with the new requirements.
ASIC has noticed variability across trustees in the extent to which they are consumer-focused. Trustees need to put their members first when it comes to handling complaints. This requires them to understand the full nature of the issue raised by the member, and the root cause of any problems identified. This is a cultural shift away from looking at complaints through a risk or compliance lens.
While it is common practice for trustees to outsource administration of their fund's IDR process, the obligation to meet the IDR requirements is that of the trustee’s. Trustees should consider whether they are satisfied with how their service provider will comply with RG 271 and ensure that they are extracting the learnings and data that will help them focus on their members’ interests.
Trustees should carry out regular and ongoing quality assurance IDR process, including whether complaint outcomes are fair.
Expanded definition of ‘complaint’
RG 271 adopts the Standards Australia definition of ‘complaint’. This definition encompasses objections to death benefit distributions, which were previously not treated as complaints by all trustees. It is important that trustees fully integrate objections into their fund’s IDR processes, data collection and complaints reporting.
Response timeframes
ASIC’s survey found that some trustees have already introduced a triaging mechanism and/or new processes to improve compliance with the new timeframes for IDR responses. This is positive.
In preparing for the new timeframes, trustees should consider whether there are barriers or risks across their business or in outsourcing arrangements and take steps to address these issues. These may include IT system constraints, resourcing or delegations.
Systemic issues
Compared to the other new IDR requirements, trustee preparedness for systemic issue identification, ownership and reporting is not as advanced. Trustees should be able to clearly define and communicate what a systemic issue is, the role different staff will play in identifying, escalating and managing systemic issues, and how they will be reported.
Data capture
Many surveyed trustees appear to be using different IT systems to record complaints information across various operational areas. Trustees should consider how data from each system can be integrated or extracted to give a holistic view of complaints handling and to support the identification of systemic issues.
Trustees will benefit from keeping in mind the new IDR data reporting requirements as they prepare for the RG 271 changes.
Background
On 30 July 2020, ASIC released RG 271 together with an accompanying instrument ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98.
ASIC has made technical and clarifying amendments to RG 271 following stakeholder feedback. Of most relevance to trustees is the addition of some guidance on ASIC’s interpretation of when complaints will involve a decision of a trustee (or failure by a trustee to make a decision) relating to the complaint. Further details on the changes to RG 271 are available here.
ASIC communicated the importance of RG 271 to the superannuation industry, including through a roundtable in November 2020, and writing to the CEOs of all trustees in April 2021.
ASIC recently announced its approach to the impending IDR requirements and other law reforms in light of the challenges faced by industry, including from COVID-19 (refer 21-213MR).
ASIC invited 83 trustees to participate in the voluntary survey between April and May 2021 and received responses from 58 trustees managing $1.6 trillion in superannuation for 19 million members[i]. This was followed by more detailed preparedness checks with a number of trustees. Trustees involved in the survey and preparedness checks represented industry, retail, corporate and public-sector funds, with both internal and outsourced administration, and ranged from small to large participants.
[i] APRA Annual fund-level superannuation statistics June 2020