It’s time for the super system to deliver on its promise to Australians
Australians have worked hard to save more than $4 trillion in super for their retirements. At this coming election we want to see policies that improve the super system, so it can deliver on its promise of supporting people when they retire.
As the leading voice for superannuation consumers, Super Consumers Australia is calling for the following three areas to be urgently prioritised:
- Deliver excellent customer service,
- Make it easier to manage your money in retirement,
- Protect people when they need it most.
1. Deliver excellent customer service
What’s the problem?
Super funds are responsible for growing people’s savings so they can have a comfortable retirement. But a series of high-profile failures by super funds – including gruelling processes for people to access their own money – show that the super industry has failed to serve and support their own members. Super funds are years behind other sectors, with optional guidance and limited standards having no discernible impact across the industry.
What are the solutions?
Government needs to set clear, enforceable expectations on the super industry that align with community expectations. This means setting mandatory customer service standards, including: timeframes for processes such as death benefit claims, standards for communication with members, and accessible service, particularly for First Nations people. Mandatory standards should also bring the super industry in line with anti-scam reforms, to make it a less attractive target to scammers.
Government can also empower Australians to know which super funds are delivering good customer service, by investing in a super customer service comparison tool. This will help people compare super fund customer service and help people figure out if they are getting value for money.
Finally, the Government can directly support vulnerable super fund members, by backing a pilot community legal service modelled on the Insurance Law Service. This would directly assist people through challenging legal processes (e.g. complex insurance claims, delayed death benefits, etc.) and help them get access to their money when they need it. It would also work closely with the super sector, regulators and policymakers to identify areas for improvement and help the super system better deliver on community expectations.
2. Make it easier to manage your money in retirement
What’s the problem?
Australia’s superannuation system has been a world leading success in building a pool of retirement savings across most of the population. However, it has been far less successful in supporting people to use these savings to deliver incomes in retirement.
The retirement system is complex and does not support people with safe defaults and independent guidance.
What are the solutions?
The Government currently has a complex web of retirement guidance available that is difficult to navigate. Government needs to streamline and simplify the Government retirement guidance services to help people in, and planning for, retirement in a cost-effective way.
Government can arm people with the information to make good choices with their retirement money and increase competition by publishing data on retirement products.
Government can help people identify and avoid poor performing retirement products by extending the annual performance test to account-based pensions.
3. Protect people when they need it most
What’s the problem?
Most Australians have one-size-fits-all life insurance bundled with their super as a default. Many people don’t know whether they have insurance or whether it will meet their needs. Insurance premiums can be costly and erode Australians’ retirement savings. Some cover overlaps with other schemes (e.g. NDIS and workers compensation) and other insurance. When it comes to claims, vulnerable people have been denied payments based on harsh tests and policy terms. Claims can also be slow and harrowing for people, leading to disputes, financial strain, and further trauma. And people face hefty taxes that reduce their claims payments, while life insurance outside super provides tax-free payouts.
What are the solutions?
The Government can make sure people get support when they need it most by removing the withdrawal tax on insurance payouts in super. Government can also assess whether there are more efficient and equitable ways to financially protect people in the case of injury, illness or the death of a loved one by establishing a Productivity Commission review of insurance in super.
Summary recommendations
- Mandatory customer service standards
- Super customer service comparison tool
- Pilot community legal service
- Streamline and simplify government retirement guidance services
- Publish data on retirement products
- Annual performance testing of account-based pensions
- Remove the tax on insurance payouts
- Productivity Commission review of insurance in super.