ASFA urges government to pass DBFO ‘without further delay’

Four months after then-financial services minister Stephen Jones released the next tranche of the Delivering Better Financial Outcomes (DBFO) reforms, the Association of Superannuation Funds of Australia’s submission on the draft bill has made it “unequivocally clear” that it wants the reforms pushed through as soon as possible.

“All our recommendations are designed to help best achieve the objectives of the package. However, notwithstanding our recommendations, we believe the draft legislation should be passed without delay and with all deliberate speed,” the submission said.

While many financial services bodies raised serious concerns around the direction of the tranche, including the FAAA notably saying it cannot support the reforms “without substantial change”, ASFA has been far more welcoming in its response.

One of the contentious areas of the bill, as FAAA chief executive Sarah Abood described it, is that the draft legislation “appears to give super trustees the ability to collectively charge for comprehensive retirement advice”.

ASFA, on the other hand, said it “strongly supports the expansion of collectively charged advice”.

“We support the three lists of topics proposed in the consultation documents,” it said.

Namely, the allowed topics, allowed circumstances, and disallowed topics lists, which outline the boundaries for this advice.

The association did, however, push for clearer references to the ability for super funds to provide advice on contributions related to the First Home Super Saver Scheme (FHSSS) and information regarding beneficiary nominations.

It also argued that funds should be able to consider social security and Centrelink benefits and other superannuation funds held by the member.

“In relation to the disallowed topics list, ASFA also wishes to clarify if estate planning will be an allowed topic insofar as it relates to superannuation – for example regarding recontribution strategies,” ASFA said.

“Our assumption is that advice on this topic would be allowed.”

Targeted prompts need ‘greater clarity’

The DBFO draft extends the ability for super funds to send prompts to specific, targeted cohorts of members around key life stages and milestones to encourage them to engage with their super.

ASFA again stressed its support for the measures, but also sought improved clarity on how they would interact with current member communications.

“ASFA recommends that greater clarity needs to be provided in relation to the terms ‘appropriate advice’ and ‘reasonable basis’, as articulated in clause 950C(1)(b)-(c), and associated provisions,” it said.

“These terms are open to various plausible interpretations and would benefit from greater definition through provision of both examples in the explanatory memorandum and regulatory guidance from ASIC.”

It also wants the prompts to be able to go further than the bill would currently allow, so that, “in certain specific circumstances”, the prompts would be able to request action from members in specified time periods.

“An example where this may be appropriate include when it is in the members best financial interest to undertake a certain action before the end of a given financial year,” ASFA said.

“In this circumstance, it would be appropriate for the prompt to call for the action to be completed before 30 June.

“Other relevant deadlines may relate to a member’s age, date of retirement, or account balance, particularly concerning contributions.”

Another tweak that the submission recommended is for the ability to opt-out of prompts for five years be reduced to two years, “given the pace at which members circumstances can change”.

This is a stark difference to the FAAA’s opinion on super nudges, with Abood arguing the cohorting of members the way the bill describes would be held back by the level of detail super funds possess.

“It requires trustees to develop a framework that can be used to target groups of members (which can be as small as two members) with ‘advice’ that suits their cohort as a collective – rather than any individual in the cohort,” she said.

“While there’s a list of characteristics given that could be used for cohorting (such as age, income, home owner status, relationships status etc), the reality is that super funds generally don’t hold much of this information on their members.”