Regulation of superannuation
7.6 The Australian Prudential Regulation Authority (APRA) is the prudential regulator for superannuation funds, other than SMSFs. SMSFs operate without prudential controls and are supervised by the ATO.
7.7 The Australian Securities and Investments Commission (ASIC) is responsible for consumer protection with regard to superannuation. It is concerned with the relationship between superannuation trustees and consumers, and aims to ensure members receive proper disclosure, useful information, and can access complaint- handling procedures.
7.8 The Superannuation Complaints Tribunal (SCT) deals with complaints about the decisions and conduct of trustees of superannuation funds other than SMSFs.
Examples of financial abuse
7.9 Stakeholders identified a diverse range of instances of financial abuse of older people through unauthorised access to superannuation funds. ASIC highlighted a number of examples of potential financial elder abuse in the context of superannuation:
instructions to take a portion of a superannuation benefit as a lump sum rather than a pension may as much reflect the importance to the elder fund member of paying down debt, or facilitating new accommodation arrangements as action by an abuser to access superannuation money for their own beneﬁt.
… instructions to continue drawdown of only the statutory minimum amount of an account based pension may reflect the active management of the elder person’s longevity risk, rather than maximising the value of a death beneﬁt that may become payable to an abuser.
… instructions in relation to the part commutation of an elder person’s account based pension may as much reflect the need to meet a ‘lumpy expense’, such as in relation to health care, as action by an abuser to access superannuation money for their own benefit.
7.10 The link between financial abuse of superannuation and banking was described in a case study provided by the North Australian Aboriginal Legal Service:
An older Aboriginal man, who had accessed his superannuation, had his bank card stolen by his daughter who went on to withdraw a substantial amount of money from his account.
7.11 Another example was provided by the Public Trustee of Queensland, who gave the example of a daughter of an elderly person suffering dementia who was able to procure the signature of that adult to withdraw a large sum in three instalments from a fund:
All that was required in order for the instruction to the fund to transfer money was a form apparently signed by the adult which in this case was emailed to the superannuation fund. As it happens the funds ultimately were dissipated by the daughter for her own benefit.
7.12 The interaction between superannuation and powers of attorney in the context of elder abuse was demonstrated in the following case study provided by Advocare Inc (WA):
Enid is an elder woman who nominated her daughter Cathy as her Enduring Attorney. Enid has tolerated financial abuse by Cathy for many years as she has no-one else to assist her with things she finds too difficult to do on her own. Cathy is now pressuring Enid to transfer superannuation funds into Cathy’s bank account, claiming that Enid will get a better return on investment. Enid was advised not to sign anything but is still vulnerable as she chose not to revoke her EPA.
7.13 A particular risk in the context of SMSFs was the potential need for trustees to have increasing decision-making support. The Financial Services Institute of Australasia (FINSIA) noted that:
the issues of population ageing and cognitive decline are a ‘silent tsunami’ for self-managed super funds (SMSFs), exposing investors in this sector to financial abuse, including fraud and inappropriate investment advice.
7.14 The Office of Public Guardian (Qld) (OPG) provided a case study that highlights the particular complexities that arise where a trustee loses decision-making ability. The case study concerned a man in his 80s named ‘Peter’:
Among Peter’s many financial assets was a self-managed superannuation fund (SMSF), of which Peter had been appointed director of the trustee company of the fund. A couple of years after moving into care, Peter was diagnosed with dementia, at which time Peter’s attorneys, appointed under an enduring power of attorney, assumed control of Peter’s financial affairs. A complaint was made to the OPG that the attorneys were financially mismanaging Peter’s funds. Peter was aged in the late 80s at the time of the complaint.
The [OPG] investigated the matter and identified … that the attorneys were not competent to manage Peter’s financial affairs due to the complexity, and their lack of understanding of the laws regulating SMSFs.
The investigation identified that, following Peter’s loss of capacity to make decisions, no changes had been made to the SMSF and Peter remained the director of the trustee company. The accountant, who had managed the accounting for Peter’s business for years, was transacting on the SMSF after Peter lost capacity. … The attorneys did not take any action to ensure that the SMSF was compliant after Peter lost capacity, and were allowing the accountant to make decisions in relation to the SMSF when he had no authority to do so.
7.15 Recommendations in other chapters of this Report address financial abuse in the context of powers of attorney and banking. Those reforms would assist in addressing a number of these examples of financial abuse. This chapter focuses specifically on the issue of elder financial abuse in the context of BDBNs, and in the SMSF sector.
Consistency in language about decision-making ability
7.16 Different language is used to describe the instances where a person does not have the decision-making ability to make legal decisions For example, the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) uses the term ‘legal disability’ and the Corporations Act 2001 (Cth) uses the term ‘mental incapacity’. Moreover, legal capacity is defined in subtly different ways across the states and territories. Differences in terminology can have practical consequences in terms of whether there is an authority to act. The ALRC has previously recommended that there be consistent terminology used for decision-making ability to provide consistency and certainty.
See, eg, FINSIA, Submission 339; Townsville Community Legal Service Inc, Submission 141; ASIC, Submission 125.
Australian Securities and Investments Commission, Submission 125.
North Australian Aboriginal Legal Service, Submission 116.
Public Trustee of Queensland, Submission 249.
Advocare Inc (WA), Submission 86.
Financial Services Institute of Australasia, Submission 137.
Office of the Public Guardian (Qld), Submission 173.
See ch 2.
See Australian Law Reform Commission, Equality, Capacity and Disability in Commonwealth Laws, Report No 124 (2014) ch 2.