Consumer protections may be at risk if a proposal to scrap the Superannuation Complaints Tribunal (SCT) and replace it with a Superannuation Ombudsman goes ahead, according to the Association of Superannuation Funds of Australia CEO, Martin Fahy.
Dr Fahy called for the government to increase funding for the SCT rather than replace it. “The SCT is in urgent need of increased funding and resourcing that reflects its growing caseload,” he said.
“We don’t want to see an outcome where consumers end up with an inferior arrangement for dispute resolution when it comes to their super.”
“With the SCT, there is no monetary limit on access or redress and there is enforceability of determinations and rights of appeal,” he said. “That protects the consumer.
A membership-based industry ombudsman scheme could lead to limits on the type or value of claims that may be pursued,the loss of direct rights of appeal and the possibility the individual having to take personal action to enforce Ombudsman decisions
A government-appointed panel has been reviewing the complaints handling framework for financial services since last May.
In December the panel issued an interim report, Review of the financial system external dispute resolution and complaints framework, which recommends replacing the SCT with a Superannuation Ombudsman and potentially introducing a compensation scheme of last resort for the financial services industry.
Dr Fahy said the SCT has a number of important strengths and protections for consumers and trustees that would be reduced or even jeopardised in a move to a membership-based ombudsman scheme.
Dr Fahy said the industry wants to improve the operation of the SCT through changes to the existing model, rather than moving to an entirely new dispute resolution body.
“There is significant scope to modernise the operation of the SCT through important changes to its governance, accountability and service model and this should be the priority for government,” he said.
“The current model has many aspects that are appropriate given the unique nature of compulsory superannuation as a financial product and the fiduciary duties owed by trustees to the fund members/beneficiaries.
“Superannuation also has other features that set it apart from other products. There is often great complexity in disputes and many parties that may be involved, so it is crucial to have deep specialist knowledge and expertise in any dispute resolution body.”
“The panel observed there is considerable merit in a compensation scheme of last resort,” Dr Fahy said.
“ASFA does not support any industry-wide compensation scheme that has the potential to involve cross-subsidisation by the APRA-regulated superannuation sector of losses incurred within other sectors.”
Dr Fahy noted arrangements already exist that effectively provide a compensation scheme of last resort for the APRA-regulated superannuation sector, in the form of Part 23 of the Superannuation Industry (Supervision) Act 1993.