Super news for July 2020

ATO clamping down on false claims

The Australian Taxation Office (ATO) is zeroing in on people trying to take advantage of the government’s coronavirus stimulus package, including early release of superannuation, JobKeeper, and boosting cash flow for employers.

ATO Deputy Commissioner Will Day said that with so many Australians impacted by COVID-19, the ATO’s priority is to ensure payments get to those who need them. “We also have an important role to ensure the integrity of the stimulus measures and when we uncover fraud or people seeking to exploit them, we’ll take action, as we know the community would expect us to,” Mr Day said.

Mr Day also warned the ATO is on the look-out for those seeking to exploit the scheme to minimise their tax bill. “We’ve received intelligence about a number of dodgy schemes, including the withdrawal of money from superannuation and re-contributing it to get a tax deduction,” he said, adding that severe penalties can be applied to tax avoidance schemes or those found to be breaking the law. Penalties for fraud can include fines, prosecution and even imprisonment for the most serious cases.

A confidential tip-off phone line has been established to allow members of the community to tell the ATO if they are concerned someone may be doing the wrong thing. Call 1800 060 062 or complete a tip-off form online at ato.gov.au/tipoff.

AFCA’s 80,000 complaints

More than 80,000 complaints were made by Australians over disputes with their bank, insurer, super fund or financial firm in the past financial year – a 13.7% increase from last year.

The Australian Financial Complaints Authority (AFCA) resolved 78% of the complaints, securing $258.6 million in compensation and refunds for consumers.

CEO and Chief Ombudsman David Locke said most complaints are about credit, insurance claims, and superannuation. “One in ten complaints also related to financial difficulty where a consumer was unable to make repayments on loans due to unforeseen circumstances or over-commitment,” he said.

The second most thorny issue for consumers was credit, with 1,711 complaints, and almost a quarter of these being about a failure to respond to requests for assistance. There were also 791 COVID-19 complaints about superannuation, the majority of which related to early access of super.
 
Mr Locke said complaints relating to the COVID-19 pandemic were more likely to involve financial difficulty. “We anticipate seeing more financial difficulty related COVID-19 complaints over the next six months as government support, such as JobKeeper payments are wound back, along with the end of financial firm initiatives such as a ban on rental evictions, and mortgage pausing.”

If you think your circumstances will change, or believe you could soon be experiencing financial difficulty, contact your bank or a financial counsellor as soon as possible to talk through your options.

MySuper Heatmap delivers for members

Millions of MySuper members have seen a reduction in fees since the Australian Prudential Regulation Authority (APRA) published its MySuper Product Heatmap last December.

The product was designed to lift outcomes for members by publicly highlighting which funds are underperforming, and the areas where they must improve. The tool uses a graduating colour scheme to show insights into the performance of all MySuper products across three areas, including investment performance, fees and costs, and sustainability of member outcomes.

The Heatmap’s first update was released on June 30 reflecting changes in superannuation fees and costs over the past six months. APRA’s analysis of the latest data shows products with 42% of members have lower fees, resulting in estimated aggregate savings of $110 million a year.

However, it also found that fund administration fees rose only slightly or remained the same, while the majority of funds that underperformed on fees and costs in the December 2019 Heatmap continue to have relatively high fees.

APRA Deputy Chair Helen Rowell said that while it’s pleasing to see that millions of members are already paying less in total fees, it’s clear this is not a time to be complacent.

“APRA is writing to the trustees of more than a dozen MySuper products that continue to seriously underperform on fees,” she said. “The letter will put these trustees squarely on notice that APRA is seriously considering its response to their failure to swiftly address these issues. Any response may include formal enforcement action.

“Superannuation trustees have a legal duty to promote the financial interests of their members. With access to APRA’s updated Heatmap, as well as their member outcomes assessments and Business Performance Reviews, trustees have no excuse for not understanding how well they are achieving this in comparison to their peers.”

Robo-advice lagging in Australia

The popularity of robo-advice in Australia is less than more established markets around the world, but micro-saving and investing apps are gaining traction here according to a new study by global researcher Investment Trends.

The recently-released Robo-advise Report includes a survey of almost 20,000 online investors and shows the appetite for automated investment services across Australia, the USA, the UK, Spain, Germany, France, Singapore and Hong Kong.

The research shows Australia is lagging behind traditional markets such as the USA, but providers like Raiz Invest – an Australian financial technology company with an app that automatically invests your spare change – has more than 200,000 active users nationwide.

Research Director at Investment Trends Recep Peker says Raiz’s popularity highlights the appeal of micro-savings functionality among Australian investors. “For other robo-advice providers, brand awareness appears to be an issue, with less than 12% of Australian online investors saying they are aware of providers like Stockspot, Spaceship Voyager and Clover or Sixpark, respectively,” he said.

The study also reveals Australian women are 4% more likely to be using robo-advice services than men.

There is significant scope for growth with 38% of Australians saying they would consider using robo-advice in the future. The recent launch of solutions like CommSec Pocket and Vanguard Personal Investor gives Australians greater access to low-cost, diversified portfolios.

“To stand out, providers must demonstrate their cost and time savings benefits, and how the service is the ideal option to begin their investing journey,” Mr Peker said.

Australians pay closer attention to super

The global pandemic and its resulting market volatility have prompted Australians to pay closer attention to their super.

This month Investment Trends also released its 2020 Super Fund Member Sentiment and Communications Report uncovering super fund members’ attitudes, needs and priorities.

Half of the 6,383 respondents surveyed believe it will take 12 months or longer for their super balance to recover fully, and less than a quarter (23%) expect a full recovery by the end of 2020.

Investment Trends Senior analyst King Loong Choi said more members are scrutinising their super balance and performance more closely, making it even more important that super funds continue to keep members informed, educated and confident in weathering the volatility.

“At present, just 61% of members believe their super fund’s range of investment options is sufficient to meet their needs while 31% say they are unsure, further highlighting the need to alleviate members’ knowledge gaps,” Ms Choi said.

Most members (68%) have actively sought guidance from their super fund, particularly to find basic information such as fees and insurance premiums, their likely balance at retirement and the balance needed to retire comfortably.

“As Australians engage more directly with their super fund, their satisfaction and confidence rises. Those who sought guidance tend to be more satisfied with their funds’ efforts to help them feel confident about the future. It is vital that super funds continue promoting and facilitating their member guidance services, given its positive, tangible impact in lifting member engagement and confidence.”

After seeking guidance from their super fund, three in four members are more likely to take action, most often to compare funds (23%), make voluntary contributions (20%), consolidate their funds (19%) or change investment options (also 19%).

Coronavirus downgrading retirement dreams

COVID-19 has shaken retiree confidence about the quality of their retirement and how long their money will last.

A new study by Allianz Retire Plus shows that Australian retirees are downgrading their retirement expectations and four in five say they don’t feel their investments are safe from the coronavirus economic downturn.

Of the 1,007 current and prospective retirees surveyed nationwide, almost 80% did not seek financial advice during the health crisis and 66% don’t feel the superannuation system will provide them with a dignified retirement. Less than a third understand investment options available in superannuation.

Allianz Retire Plus CEO Matt Rady says the results demonstrate that Australia’s superannuation system, which is considered one of the best in the world, is not working for a lot of people it was designed for.

“COVID-19 is taking a terrible toll on the economic wellbeing of many retirees,” Mr Rady said. “In addition to health concerns about the virus, and not being able to see loved ones as much, retirees are yet again suffering from the share market rollercoaster. COVID-19’s impact has exposed shortcomings in retirement product design, access to financial advice and superannuation education.”

Industry wide, members’ overall satisfaction with their super fund only declined by 1% in the past year despite the pandemic and recent legislative changes. According to Roy Morgan, ESSSuper (82%) and UniSuper (80%) remain the highest rated, while Australian Catholic Super (77%) overtook Cbus (76%) for third spot.