Industry super funds are often not complying with the rollover requirements of the new ‘better super’ legislation — either deliberately or through administrative incompetence, according to some financial planners.
Three senior planners told Money Management last week that some funds are specifically not complying with the 30-day rollover rule within the legislation, which requires all super funds to pay out benefits within 30 days.
The planners, all of them Victoria-based, are calling on the Australian Prudential Regulation Authority (APRA) as regulator to act to ensure the legislation, which came into force on July 30, this year, is enforced throughout the industry.
All of them could point to specific incidences in which they claim individual industry funds have exceeded the deadline, sometimes taking up 60 days and even 90 days to complete a rollover.
Each also claimed to know of other planners who are also experiencing similar problems with individual industry funds’ non-compliance with the new 30-day rule.
The planners argue that apart from the inconvenience and expense they incur from the delays as financial planners, clients invariably see the delays as a disservice by the planners.
A greater cause for their concern, however, is that clients are being financially disadvantaged by the rollover delays in terms of joining a new fund or an allocated pension.
Simone Vanden-Driesen (CFP), director of Melbourne-based Leishman Financial Services, said industry funds are “making every excuse” to frustrate the 30—day rule.
“They will tell you they have lost the paperwork when you phone to find out why the client money has not come through on time — when you know jolly well they haven’t.”
Vanden-Driesen said the industry funds are also demanding member details be filled out on the fund’s own personal corporate rollover form, even after the planner has sent the fund the client details on an Australian Taxation Office (ATO) form.
“This is contrary to the new ‘simpler super’ legislation, which now requires the use of a standard ATO rollover form.”
The rollover delays are often a deliberate attempt to dissuade fund members from transferring their funds by trying to make the rollover process as difficult as possible, she said.
By contrast, most commercial funds she deals with are compliant with the 30-day rule, although in a “few instances they’ve had reasonable excuses — although I wouldn’t say these are good excuses”.
In a recent case, it took about “50 to 60 days” to get a rollover back from an industry fund for a client who had retired and wanted to start his allocated pension in order to get an age pension.
In another case, Vanden-Driesen wrote to an industry fund in May this year — before the new legislation came into force — asking for a client rollover to an allocated pension to be processed.
“We contacted them again in the first week of July to ask why the rollover had not yet been completed, only to be told indignantly that they didn’t have to comply with the 30-day rule as our request was made before July 1.”
In both cases, she said, the clients had “diligently salary sacrificed significant amounts of money up to their retirement, but then had to wait for 60 or 90 days to get their first age pension”.
“The problem is Centrelink won’t start their age pension until they get schedules from the allocated pensions, and you can’t get these schedules until the allocated pensions start.”
In other instances, she said, industry funds are “ignoring our instructions to send client rollover cheques care to us as the planner so we can match it with the paperwork and send it to the new fund or allocated pension”.
“Instead, they will send it directly to the client’s new super fund or allocated pension, and, of course, without the accompanying paperwork they don’t know who the cheque is for and where it’s from.”
Vanden-Driesen said the regulator “needed to employ the same level of standards to industry funds that they do for commercial funds.
“It seems it’s fine to audit these big commercial organisations because an ‘i’ isn’t dotted or a ‘t’ is not crossed, but it seems the industry funds get left behind when it comes to being taken to task over things.
“It’s all very well for industry funds to be out there advertising their cheap fee benefits, but they need to be providing a good administration service and complying with client requests.”
Frank Ferrigno, certified financial planner and director of East Malvern-based business Primeplan Securities, said some industry funds have been delaying the rollover process by insisting on the use of their own rollover forms.
“It’s a generally accepted practice that a rollover request to a super fund is carried on the rollover form for where the rollover is going to.
“However, some industry funds will contact you to insist they have the same information sent to them on their own forms, which in itself can slow down the process by anywhere from seven to 14 days.”
Ferrigno said it seems to be a tactic that they are using to slow down the process, rather than a genuine mistake, although he is unsure what their motivation for this could be.
“Perhaps their mentality is that if we make the process as hard as possible for fund members, they will probably just give up on trying to take their money out.”
Gary Lucas, managing director of Sale-based MG Financial Planning, believes the new legislation is bringing funds into line with appropriate service levels, although there are still a few that “frustrate us a bit”.
One source of frustration is from industry funds “ignoring clear written instructions to forward client rollover documents and cheques to us as financial planners of the client”, he said.
“Some industry funds still insist on sending the documents and cheques to clients, and clients get confused and upset by this because they think that we as their financial planner are handling this for them.”
Approached for comment, an APRA spokesperson said super fund members “dissatisfied with their funds’ processing of their portability transfer requests are advised to follow the established complaints system for superannuation”.
“This involves the complaint initially being raised with the fund concerned and, if the response is not satisfactory, the matter should be taken up with the Superannuation Complaints Tribunal.
“As a prudential regulator, APRA is able to look into systemic issues if they are brought forward to APRA.”
