In January 2016, a woman from a remote Indigenous community aged in her early fifties contacted Financial Counselling Australia looking for help. She was desperate to be granted an early release of $20,000 from her superannuation account to pay for extensive dental surgery.
“The client said getting the dental work done would cure the pain she was suffering, but more importantly she wanted to be able to smile in photos with her grandchildren,” Financial Counselling Australia coordinator financial capability and community practice Lynda Edwards says.
“She then went on to tell me that her daughter was murdered and there weren’t any good photos of them together smiling.”
The client’s claim met the super fund’s conditions for early release on medical grounds, but her inability to provide the required identification documents meant she couldn’t get access to her cash.
It took more than six months of Edwards liaising with the fund, but by early August the client’s identity had been satisfactorily confirmed and the money released.
The challenges experienced by that particular client, who wished to remain anonymous, in proving her identity to her super fund is all too common among members living in remote Indigenous communities, Edwards says.
Stringent identification requirements introduced a decade ago via the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 have had dire unintended consequences for many Indigenous people living in remote communities.
“Some people don’t have birth certificates, have their name misspelled, have different dates of birth, go by skin names or observe cultural practice to change names when there is a death in the community,” says Amanda Young, the chief executive of First Nations Foundation – a charity that works towards the financial inclusion of Indigenous Australians.
In an attempt to reduce hardship the Australian Transaction Reports and Analysis Centre (AUSTRAC) released new guidance to super funds in July 2016 designed to empower them to take a more flexible approach.
But six months later most super funds are still dragging their heels.
At the Indigenous Super Summit in November one frustrated financial counsellor challenged the assembled fund executives and trustees as to how many had fully implemented the latest guidance at their fund. Not one could say yes.
Fund executives said changing their policies and procedures to accept the new, less onerous, identification rules would take time.
Financial counsellors working in Indigenous communities spend the lion’s share of their time dealing with superannuation related issues, mostly around early access, disability insurance, and death benefits.
The Australian Securities and Investments Commission (ASIC) wants super fund executives to understand the problem is reinforcing a commonly held view that the system is ‘stolen wages’ in another guise.
Feels like stolen wages
Well into the 20th century, Australian governments garnished large portions of Aboriginal and Torres Strait Islander peoples’ wages. In Queensland, half of Indigenous workers’ wages went into government-administered savings accounts, with a further 25 per cent going to income tax and deductions for an ‘Aborigines Welfare Fund’, resulting in a take home pay of only 25 per cent as ‘pocket money’.
“Most of the money that was placed through trust funds was never returned to those it belonged to regardless of how hard they tried – and believe me they tried hard to access that money,” says Michael Galluzzo from ASIC’s Indigenous outreach program.
“We hear lots of comments like, ‘No, we don’t bother with that super stuff, it’s like stolen wages’,” Galluzzo says.
AUSTRAC national manager strategic intelligence and policy Bradley Brown encouraged super funds to embrace the new guidelines.
“Indigenous people live in some of the most remote parts of this country and it makes it extremely challenging,” Brown says.
“We can sit in ivory towers in the cities and not get that.”
AUSTRAC’s recent guidance states alternative identification is valid as long as it is reliable and independent. This includes, but is not limited to, an original primary photographic identification document; an original primary non-photographic identification document; and an original secondary identification document.
“Alternative identification documents could include references from key members of Indigenous communities such as elders or community leaders, medical practitioners and school principals,” Brown says.
Indigenous Superannuation Working Group chair Eva Scheerlinck says some funds are already taking updated protocols to the board for approval, but even then it would likely be June 2017 before they were implemented.
The Indigenous Superannuation Working Group is a cross industry collaboration between the Australian Institute of Superannuation Trustees, the Association of Superannuation Funds of Australia, the Financial Services Council, Women in Super, and a handful of super funds.
Scheerlinck says super fund trustees will have to be satisfied that any new identification protocols balance the need for financial inclusion and risk management, at a time when there is more cybercrime and attempted identity theft than ever before.
Proper training to empower frontline fund staff, such as call centre operators, will be critical, she says.
Systemic financial exclusion
Identification challenges are yet another obstacle to Indigenous Australians engaging with superannuation, a system that too often excludes them.
Superannuation coverage for Indigenous Australians is about 66 per cent for men and 55 per cent for women, compared to rates of 85 per cent for men and 80 per cent for women across the population more generally. Retirement outcomes of Indigenous workers are approximately 27 per cent lower than average.
One of the most shameful statistics is that Indigenous Australians remain much less likely to live to an old enough age to access and enjoy the super they have saved. In 2010-2012, life expectancy at birth for Aboriginal and Torres Strait Islander males was 69.1 years, and 73.7 years for women, representing a gap with non-Indigenous Australians of 10.6 years for men and 9.5 years for women.
“It is critical that the industry develops a better understanding of the underlying cultural and socioeconomic issues for Aboriginal and Torres Strait Islander peoples in accumulating, accessing and distributing their superannuation,” Australian Human Rights Commission president professor Gillian Triggs told Investment Magazine.
ASIC’s Indigenous outreach program wants to help super fund executives gain that understanding and the regulator has begun facilitating visits to regional and remote communities.
The senior leadership of QSuper joined ASIC on a fact-finding trip to the Lockhart River community in 2014. Since then QSuper has implemented a range of practical changes.
The $60 billion Queensland public sector fund now identifies postcodes where there is a high risk of mail going astray, often because it is delivered infrequently by plane to a central location rather than direct to the home; and makes more of an effort to contact these members by other channels, such as phone.
This is important because a series of returned letters can trigger the transfer of inactive accounts into “lost” super funds administered by the Australian Tax Office.
Each fund will need to tailor solutions to the needs of its specific member cohort.
At UniSuper, the industry fund for university academics, identification requirements have not posed a challenge for members, manager assurance and reporting, Marlene Sadhai, says.
HESTA general manager business development and policy Mary Delahunty says the industry fund for health workers is looking for ways to close the Indigenous super gap, through the development of its Reconciliation Action Plan.
ASIC has extended an open invitation to the senior leadership of super funds to join a roadshow to the Anangu Pitjantjatjara Yankunytjatjara Lands, a remote Indigenous community in South Australia, in the second half of 2017.
This article first appeared in the December print edition of Investment Magazine. To subscribe and have the magazine delivered CLICK HERE. To sign-up for our free regular email newsletters CLICK HERE.