Superannuation trustees are being urged to review their internal dispute resolution (IDR) arrangements after the first stage of an ob体育 surveillance found indicators of significant compliance issues.
ob体育鈥檚 surveillance examines trustees鈥� compliance with the new enforceable requirements in Regulatory Guide 271鈥�Internal dispute resolution鈥�(RG 271), which took effect on 5鈥疧ctober 2021. It follows ob体育鈥檚 earlier survey of trustees鈥� preparedness for compliance with RG 271, which highlighted focus areas for trustees before the new requirements commenced (refer 21-230MR).
For the first stage of the surveillance, ob体育 gathered and analysed data on the status and timeliness of complaints handling (excluding objections to death benefit distributions) from a selection of 35 trustees of 38 funds covering 49,029 complaints received between 5鈥疧ctober 2021 and 28 February 2022.
鈥楧ispute resolution is an essential part of the consumer protection framework in Australia,鈥� ob体育 Commissioner Danielle Press said. 鈥楢 trustee鈥檚 approach to dispute resolution is a meaningful measure of whether they are focused on the interests of their members. It also indicates the maturity of the trustee鈥檚 approach to risk. When done well, dispute resolution can benefit trustees by helping build members鈥� trust and confidence.
鈥楬owever, the first stage of ob体育's surveillance about internal dispute resolution practices of trustees has identified some problem areas that need fixing. We want trustees that have fallen behind to strengthen their internal dispute resolution arrangements to make sure that member complaints are handled in an effective, fair and timely way,鈥� Ms Press said.
Observations based on data collected
- Recording of complaints: RG 271 requires trustees to record all member complaints. Overall, funds recorded complaints at a rate of 30 for every 10,000 members (calculated using the number of member accounts that the funds had as at 30 June 2021). However, 10% of the funds that ob体育 looked at recorded less than 10 complaints for every 10,000 members. This is significantly lower than the overall rate. ob体育 is concerned that the low complaint rate may be a result of some trustees failing to record all member complaints or adopting an inappropriately narrow definition of 鈥榗omplaint鈥�
- Response timeframes: Across the 38 funds reviewed, 2.7% of the total IDR responses were sent after the 45-day maximum timeframe generally required under RG 271. Of these, seven funds sent out 10% or more of their IDR responses after 45 days. ob体育 is concerned that trustees may be over-applying the limited exceptions to the maximum timeframe or not sufficiently monitoring how long complaints take to resolve.
- Informing complainants of delays: RG 271 requires trustees to notify complainants of delays and their right to go to the Australian Financial Complaints Authority when a written response to a complaint is not sent within 45 days. However, ob体育鈥檚 review found that in such circumstances, complainants were not notified nearly 50% of the time.
- Process failures: One in three trustees advised ob体育 that there were varying degrees of process failures or errors in their IDR systems. These included identifying or capturing complaints correctly, omitting mandatory content from IDR response letters or failing to send out IDR responses for some complaints.
Commissioner Press said, 鈥榦b体育 warned trustees that they needed to prepare for compliance with the enforceable requirements in RG 271. We expect all trustees to have in place effective arrangements that support expressions of dissatisfaction from their members and deliver fair, transparent and timely member outcomes. Trustees should continually monitor and update their processes to ensure these remain fit-for-purpose鈥�.
In the next stage of the surveillance, ob体育 will check how relevant trustees among those reviewed, are addressing the concerns identified so far and closely examine a smaller sub-set of trustees. ob体育 will also consider regulatory action where appropriate, and intends to communicate the outcomes once the surveillance is complete.
Background
For this review, ob体育 chose 35 trustees of funds with more than 50,000 member accounts, and predominantly with over $10 billion in assets. ob体育 excluded trustees likely to go through significant change in the short to medium term, such as a change of control or merger.
According to APRA, as at 30 June 2021, the 38 funds in ob体育鈥檚 review covered industry, retail, public sector and corporate funds, managing approximately 16.5 million member accounts and over $1.5 trillion in assets.
RG 271 explains what financial firms must do to have an internal dispute resolution system that meets ob体育鈥檚 standards and requirements. Certain provisions in RG 271 were made enforceable by way of . Superannuation trustees also need to comply with s101 of the SIS Act in relation to IDR.