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Pensions Regulator announces changes to the DC scheme return for 2024
The Regulator has issued an online announcement about upcoming changes to its DC scheme return.
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Australia | Publication | August 2023
This article was co-authored by Catherine Fitzpatrick.
In light of the discussion paper published by the Centre for Women’s Economic Safety (CWES) last year, it is timely for banks and other financial institutions to consider the risk of financial abuse at every juncture of the product design and distribution process. This groundbreaking discussion paper is now driving the national conversation around product design and financial abuse. The paper, titled ‘Designed to Disrupt: Reimagining banking products to improve financial safety’,2 is the first in its series and examines how the finance sector can play a central role in preventing economic harm to customers by incorporating ‘Safety by Design’ principles into financial products and services for all customers’ benefit. It outlines how Australian financial institutions have already taken significant steps to tackle the widespread weaponisation of financial products and reasons why they should continue to strengthen their efforts.
Since its publication, some of Australia’s leading financial institutions have re-designed their financial products in line with CWES’s recommendations, heralding a marked change in the financial industry’s product design objectives. On a global scale, the research behind financial abuse is growing and multinational organisations, and local and federal governments are supporting the proposed actions coming out of the research. While we have undoubtedly seen steps in the right direction, there is still a long road ahead. In fact, recent quantitative data in Australia has shown that “The impacts of financial abuse incurred an estimated $5.7 billion in direct costs for victims and $5.2 billion in costs for the broader economy in 2020”.3
In Australia, new financial regulations introduced over the past decade have forced a significant shift in the approach taken by financial institutions to develop and market financial products and services. For example, the design and distribution obligations introduced by ASIC in October 2021,4 require financial institutions to design and distribute financial products with a consumer-centric approach in an effort to prevent consumer harm.
From a global perspective, a raft of complex financial regulations and standards have required financial institutions to prioritise consumer protection and the prevention of exploitation. For example, ISO 22458:2022 (Consumer vulnerability — Requirements and guidelines for the design and delivery of inclusive service) requires organisations to take a proactive, rather than a reactive, approach when dealing with vulnerable customers. In light of the evolving regulatory pressures faced by the finance industry globally, there is no better time than now to adopt and incorporate the Safety by Design principles.5
The CWES paper outlines key examples of how financial abuse perpetrators have ‘weaponised’ financial products and services to inflict harm on vulnerable people. This ‘weaponisation’ includes instances where perpetrators use a range of financial products and services to inflict harm, such as opening credit cards in victim-survivor’s names, withdrawing cash from joint bank accounts without the other party’s consent or awareness for the purpose of abuse or coercive control, and using payment descriptions to send threatening messages.6 According to research from the United Kingdom,7 perpetrators hiding identification documents of victim-survivors to prevent access to their financial products is another common example of how the design of financial products can enable abuse.
Moreover, the long-term impacts of financial abuse can range from permanently damaging credit ratings, leaving victim-survivors with multiple and compounding financial debts that they are unable to repay, to adverse mental health consequences.8 The finance sector has started to monitor and minimise features of products that enable financial abuse to occur, for example, by disrupting abuse in payment descriptions. However, the sector globally has been working to determine more effective ways to support customers who are vulnerable to financial abuse and, importantly, to prevent the initiation of abuse in the first place.
Regulators around the world are likely to expect banks and financial institutions to make increased efforts to protect all vulnerable customers, including by adopting proactive product design initiatives. For example, tailoring Safety by Design principles to redesign financial products can make it harder for financially abusive customers to inflict harm on others.9
The Safety by Design Principles developed by the Australian e-Safety Commissioner with the technology sector can be broken down into 3 pillars:
These principles are intended to have global applicability and aim to shift the focus away from what victim-survivors can do to stay safe, to what product and service providers must do to end abuse and hold perpetrators accountable.10
The CWES paper sets out a practical starting point for banks and other financial institutions to adapt and implement a new Financial Safety by Design framework, urging every provider to commit to terms and conditions (T&Cs) in their products that make it clear that:
We have already seen two of the leading financial institutions in Australia commit to updating their T&Cs and incorporating other Financial Safety by Design Principles in their products. However, there are other mechanisms for improving financial safety, such as:
Ultimately, banks and financial institutions rely on customer disclosure to identify financial abuse and need to keep in mind different socio-cultural arrangements and customs when determining their appropriate response. This is an incredibly difficult ask. However, with greater awareness of these issues and upfront efforts to mitigate financial control and abuse in the design-stage, financial institutions can better understand where to dedicate resources to combat financial abuse and evaluate current approaches to determine the most effective deterrents and interventions. Incorporating Financial Safety by Design principles, in conjunction with a deeper global understanding of prevention and an increased commitment to supporting victim-survivors, is key to addressing the systemic issue of financial abuse.
Publication
The Regulator has issued an online announcement about upcoming changes to its DC scheme return.
Publication
On July 30, 2024, the Regulator published its market oversight report on how trustees are complying with their environmental, social and governance (ESG) duties, including in respect of climate change.
Publication
We reported last month that the Court of Appeal had agreed with the High Court’s previous judgment that all rule amendments to contracted-out DB schemes between 1997 and 2013 require written actuarial certification. Three pensions professional bodies have now issued a joint statement on the effect of the ruling.
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