Member communication must be crystal clear, says ASIC
Wednesday 4 March 2020
PYSP reforms: Trustees must provide members with accessible, accurate and actionable information
ASIC’s Superannuation Senior Executive Leader, Jane Eccleston, discusses the regulator’s recent review of trustee communications regarding Protecting Your Superannuation Package (PYSP) reforms. Some of the findings are positive, but she says there remain areas of concern that need to be addressed in order to protect members’ interests.
In 2019, superannuation trustees faced a new communications challenge: how to help affected members understand and, if appropriate, respond to the PYSP reforms. The fact that many of the members impacted had inactive or low balance accounts made this task all the more difficult.
Many members responded to communications about the changes. While there were a range of reasons why, their response emphasised that communications to members do matter. It reminds us that a trustee’s mindset about communications needs to focus on its members, not just its strict compliance obligations.
As you know, the Government introduced the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 (PYSP Act) in order to reduce unnecessary erosion of superannuation savings by inappropriate fees or insurance arrangements.
The PYSP reforms are designed to reduce consumer harms by:
- cancelling insurance on accounts that had been inactive for 16 months, unless the member acts;
- transferring inactive accounts with balances below $6,000 to the ATO, unless the member acts;
- capping administration and investment fees at 3 per cent for accounts with balances below $6,000; and
- removing exit fees.
The very real implications of these reforms for consumers means it is important that trustees provide accessible, accurate and actionable information to their members to help them make decisions about their superannuation.
ASIC recently undertook a sample review of 12 trustees’ member communications about PYSP to see how well trustees have implemented the reforms. We have reported on our findings and set expectations for industry about the implementation of PYSP and related legislative reforms as well as communications with members more broadly. You will find more detail in Report 655 Review of member communications: Protecting Your Superannuation Package (PYSP) reforms (REP 655).
About the review
ASIC looked at 12 funds offered by different trustees for the review, which focused on the initial implementation of the PYSP reforms. Our sample included trustees that we felt would have been considerably affected by the PYSP reforms: for example, trustees with a relatively high number of inactive accounts.
We reviewed approximately 1,100 documents, which consisted of documents mandated under the PYSP Act and Regulations as well as communications and marketing materials about the reforms, such as communication plans and call centre scripts.
We were interested not only in whether the mandated documents complied with the legal requirements but also the broader question of how well the communications were helping members understand and, if appropriate, respond to the reforms.
We also reviewed the disclosures about the PYSP reforms from several other trustees and third parties that came to our attention through other means. The variety of documents reviewed provided us with an interesting picture of the overall member communications process.
While the communications review was not exhaustive, the findings are important to all trustees framing communications to members on PYSP and related reforms as well as other topics more broadly.
What did ASIC find?
Generally, there were aspects of communication that were done well.
We found that when communicating about insurance changes, some trustees:
- provided clear context for why fee changes were being made and the potential benefits to members;
- used multiple communication channels to make sure that the messages reached their members; and
- provided factual information about the member’s current superannuation arrangements in communications to help the member understand the impact.
However, there were also some clear areas of concern that had the potential to lead to consumer harm.
Some of the PYSP communications material reviewed by ASIC didn’t provide sufficient context for the reforms or adequately explain what the changes meant for members, suggested only one possible option for action or provided a limited range of options, or had ‘bare minimum’ messaging and used complex language. In some cases, trustees had limited or incomplete contact information, so they weren’t able to deliver information to some members.
What more can trustees do?
Many Australians don’t focus on their superannuation, so trustees should ensure that their communications material is balanced while remaining accessible and usable. Trustees should be mindful that each piece of communication is important as it may be the only one with which a member engages. When communicating about PYSP, it is not enough to focus solely on encouraging members to retain insurance cover, or to remain in the fund.
Trustees should also be mindful that communication with members about important matters isn’t treated as a compliance exercise. To continue to implement the reforms effectively, they should take a member-centric approach to designing and delivering their communications, while also balancing their own operational priorities.
In ASIC’s view, they must consider their members’ needs first and focus on these big issues:
Trustees need to give clear, balanced information about the importance and purpose of the reforms
Some trustees provided contextual information about PYSP well, and in doing so, placed their members in a better position to make an informed decision.
But in the case of insurance cover, we found trustees who failed to provide an appropriate explanation of the importance and purpose of the reform and the potential benefits to individual members — largely ignoring the issues of account proliferation and its impact on account balances, or of insurance premiums eroding members’ retirement savings.
Similarly, in relation to inactive low-balance accounts, a number of trustees did not explain the purpose of the reforms. Some members may in fact be better off with the ATO, which may be able to reunite the member’s funds with their active superannuation account.
Trustees need to provide appropriate options and avoid techniques that influence members to take a particular course of action
In the case of insurance cover, we noticed that some trustees facilitated opt-in decisions, for example directing members to retain their insurance by phone, in writing and through online forms and member portals. We identified that one trustee incentivised their call centre staff to retain members’ insurance.
In relation to inactive members, we found trustees who provided more straightforward calls to action if the member wanted to remain with the fund than if they wanted to leave the fund. One trustee used simple text message reminders to create a sense of urgency about opting in.
Trustees need to ensure that they provide a range of appropriate options, and avoid nudging members in a direction that is more in the trustee’s best interest – not the member’s.
Trustees need to improve their data on members to provide them with relevant information
Good data is essential to communicating with members. In our review of 12 trustees with 6 million member accounts, we found that more than 21,000 member accounts did not receive the insurance cancellation notices because the trustee did not have current contact details for the member. The ability of trustees to communicate other than by letter was not always possible due to the trustee having only limited contact details.
Accurate, up-to-date data also means that a trustee can provide members with relevant, factual information such as their account balance, insurance premiums, level of insurance and last contribution date, so that they have sufficient information to make an informed decision.
Trustees should keep their members front of mind when crafting their communications
Trustees looking to improve the effectiveness of their communications should do the following things:
- Layer information: Only include necessary information, and structure from most important to least important (from a member’s perspective).
- Use signposts: Create short sections with headings, so it’s easy for members to find answers to questions they may have. Clearly highlight where the member can get additional information or make further enquiries.
- Draw on data: Updating member data regularly means a trustee can provide members with relevant information and take a multi-channel communications approach.
- Make the process easy: Member-centric communication needs to be backed up by consumer-centric processes. Next steps should be clear and simple, and there should be no risk that members may inadvertently make a choice they didn’t intend to make.
- Provide help: Trustees should ensure that their member support processes are user friendly; their contact centres are well-resourced to handle additional enquiries; their staff have the resources to help them deal with these enquiries; and that extra communication channels are included.
ASIC has already obtained corrective disclosure in relation to some of the PYSP communications we have reviewed. For example, trustees have changed their disclosure documents such as election forms and website content. Where we felt the matters were sufficiently serious, we are considering further action.
Trustees now need to continue to communicate with their members about the PYSP reforms as part of their usual business processes.
While our review is not a complete scan of all the disclosure and communications in relation to PYSP, we think our findings are important and useful for all trustees when framing member communications.
Whether communicating about PYSP and related reforms such as Treasury Laws Amendment (Putting Members’ Interests First) Act 2019 or other topics more broadly, we encourage all trustees to look at their current practices in designing member communications and take steps to improve the quality communication based on their members’ best interests.
Jane Eccleston, senior executive leader, superannuation, ASIC