Policy & Research Archive

AIST Policy News

Final stage of review into efficiency and competitiveness of the superannuation system announced

The next stage of the Productivity Commission’s review into superannuation efficiency that will focus on default settings, insurance, and fees and returns has now commenced.

The third and final stage of the Productivity Commission review into the efficiency and competitiveness of the superannuation system commenced on 1 July, following the receipt of Terms of Reference from the Government on Friday.

Stage three will use the criteria identified in stage one of the review to assess the efficiency and competitiveness of the system, including group insurance arrangements in super.

It will also make recommendations on the default fund selection models developed during stage two of the review.  The final report on these default models is scheduled for release in mid-August.

The stage 3 draft report is due to Government by January 2018, with the final report due by July 2018.

AIST will be involved in the consultation process. Members wishing to be involved should contact AIST executive manager, policy & research, David Haynes at dhaynes@aist.asn.au

Terms of reference for the final stage of the review include:

Costs, fees and net returns

  • whether disclosure practices are resulting in a consistent and comparable basis for meaningful comparisons to be made between products;
  • whether additional disclosure would improve outcomes for members;
  • whether the system is minimising costs and fees (including, but not limited to exit fees) for given returns;
  • what impact costs and fees have on members with low account balances, and what actions could be undertaken – whether by funds or policy changes – to ensure that these balances are not eroded needlessly; and
  • whether tailoring of costs and fees for different member segments would be appropriate.

Default fund members

  • whether the current default settings in the system are appropriate, or whether policy changes would be desirable; and
  • whether an alternative default fund allocation mechanism should be introduced that would deliver net benefits.

Insurance in superannuation

  • the impact of insurance premiums on retirement incomes of both default cover and individually underwritten cover funded inside of superannuation;
  • the extent to which current policy settings offset costs to government in the form of reduced social security payments;
  • whether policy changes could improve default cover through superannuation, so that default cove:
    • provides value-for-money;
    • does not inappropriately erode the retirement savings of members of all ages; and
    • delivers consistent outcomes across the system; and
  • whether policy changes are needed to ensure that insurance is not a barrier to account consolidation.

The broader financial system

  • In response to the 2014 Financial System Inquiry, the Government agreed to periodic reviews of competition in the financial sector. Pursuant to this response, the Government has also tasked the Commission to conduct an inquiry into competition in the financial system more broadly.
  • The two inquiries should not duplicate analysis or reporting.

ASIC member experience report puts focus on insurance within super

A new report from ASIC has raised concerns of poor disclosure and inappropriate defaults being used for insurance arrangements within superannuation.

The report – issued by ASIC on Friday – focuses on the key principles that could help improve the member experience throughout the superannuation lifecycle. That is – joining a fund; participating in a fund; and changing or leaving a fund.

ASIC found that in many cases, there was poor disclosure where members’ insurance cover has ceased or changed without adequate forewarning by the fund. Furthermore, it found that some funds are using inappropriate defaults for setting insurance premiums, such as assuming members are smokers.

Key insurance concerns noted include:

  • Disclosure about insurance cover
  • Changes to or cessation of cover
  • Default transfer arrangements
  • Claims handling and complaints

ASIC noted that the superannuation industry is currently considering insurance issues through the Insurance in Superannuation Industry Working Group (ISWG) and called on the ISWG to consider the report.

Other key concerns raised in the report include:

  • Product dashboards –  many not meeting basic requirements
  • Online calculators – who provides them and the results they generate
  • Group branding – ensuring trustee is clearly disclosed at all times
  • Consolidation –  disclosures of risks and benefits
  • Vulnerable consumers – identification of needs and engagement

The findings of this report will also inform two of ASIC's compliance projects which are underway in superannuation for 2017,'Employers and Super' and 'Insurance in Super'. In particular, the deeming by default of members as 'smokers', and the associated cost of additional premiums, will be examined to see how widespread the practice is.

Members seeking more information should contact AIST senior policy advisor, Karen Volpato at kvolpato@aist.asn.au


New DASP tax rate changes are now in effect 01 July 2017

New tax rates for the Departing Australia Superannuation Payment have now come into effect.

The tax rates for the DASP apply from 1 July and are set at:

  • 0% for the tax-free component
  • 35% for a taxed element of a taxable component
  • 45% for an untaxed element of a taxable component
  • 65% for a Working Holiday Maker, applied to both the taxed and untaxed element of the taxable component.

Gaps remain in proposed external dispute resolution body

AIST and Industry Super Australia (ISA) have called on Government to address a number of gaps in the proposed legislation for a new external dispute resolution scheme.

In a joint submission to Treasury, AIST and ISA have identified multiple issues regarding the proposal to establish a new external dispute resolution scheme to replace the Superannuation Complaints Tribunal and the Financial Ombudsman Service.

In summary, AIST believes:

  • The scheme must have a transparent funding model in order to minimise inequity and cross-subsidisation.
  • There are a number of transition issues including the management of superannuation expertise; funding; cost duplication and transfers of disputes need to be addressed.
  • The scheme must have a suitably comprised board with superannuation industry representatives and should utilise expert panels to resolve complex disputes.
  • The legislative arrangements underpinning the new scheme have significant gaps and the new body lacks certain powers to operate effectively. Gaps include lack of time limits for bringing a complaint; removal of participant rights to seek judicial review; and the potential exclusion of trustees from the dispute resolution process – particularly in regards to insurance complaints.

AIST and ISA believe it is critical that the gaps in the legislative arrangements underpinning the new scheme are rectified, for funding to be transparent, and for our concerns around elements such as the transitional arrangements to be addressed.

Furthermore, in an additional submission to the Ramsay Review last week, AIST voiced concerns around the use of a compensation scheme of last resort for superannuation complaints. This is notably because unpaid determinations are not an issue within the superannuation sector as super funds are required by law to comply with the decision that is made. Due to this, AIST argued that profit-to-member super funds should not be made to contribute to any compensation scheme.

AIST also submitted that there is no evidence of redress problems within the super sector. Any redress scheme could potentially jeopardise members’ interests as members’ money would ultimately fund the scheme and there is no evidence that allowing redress would be beneficial.

Members seeking more information can contact AIST research officer, Jake Sims at jsims@aist.asn.au

Responses wanted: Monash Uni survey on retirement income products

Monash University are seeking industry input responses to a survey as part of a research project aimed at designing comprehensive income products for retirement (CIPRs).

The survey is part of the research project “Designing Comprehensive Income Products for Retirement (CIPR)” conducted by Dr. Jimmy Feng (Monash University), Dr. Yuanyuan Gu (Macquarie University), and Dr. Barbara Chambers (Monash University).

The project aims to assist super funds in understanding fund member preferences on various features that can be included in a retirement income product (e.g., longevity protection, long term care insurance).

Researchers are asking for input on retirement income product features that are important to retirees. To help, please complete a short 20 minute survey. Simply click on the link below (or copy/paste the complete link into your browser) to complete the survey:


The survey is conducted through the Qualtrics platform. All responses will be kept confidential. Research results will be shared with AIST and its member funds.