Paul Howes, Head of Wealth Management Advisory, KPMG Australia and
Josephine Cashman, Member of the Prime Minister's Indigenous Advisory Council; Managing Director, Riverview Global Partners
Australia’s biggest Indigenous population lives in Western Sydney. Yet in the Northern Territory, Indigenous Australians account for 30 percent of the overall population. And this is projected to rise to 50 percent by 2030. Many Indigenous Australians therefore live in remote and regional areas where depressed labour markets leave a significant number of people dependent on welfare and receiving no superannuation at all.
Indigenous Australians who are in employment and who do receive superannuation payments face a myriad of issues that substantially reduce the efficacy of this system for them, their families, and their communities.
These issues include low levels of financial and language literacy, the onerous administration requirements of the superannuation industry, and relatively low incomes.
The greatest challenge faced by Indigenous Australians, however, is life expectancy. The average life expectancy of an Indigenous Australian is 67.5 years.1 Access to superannuation benefits is generally restricted to beneficiaries who have reached the preservation age of 60.2 Life expectancy is lower for people in regional and remote areas. The reduced life expectancy of Indigenous Australians, which is about 17 years lower than that of the overall population, along with the higher proportion of Indigenous Australians living in more remote areas contributes to a lower life expectancy than in major cities.3
The average Indigenous man born between 2005 and 2007 therefore has only 7.5 years to benefit from his super, relative to 18.9 years for the average non-Indigenous man born between 2005 and 2007.
Superannuation was created as a universal and compulsory benefit to provide access to a more dignified retirement for all working Australians. Grounded in this foundational principle lies a need to better respond to the unique needs of Indigenous Australians and provide solutions that are fit for purpose.
We believe there is much that can be done by superannuation funds, regulators, governments, and communities themselves to ensure that Indigenous Australians have fair and equitable access to the benefits of Australia’s superannuation regime.
The cornerstone of any effort to improve Indigenous Australians’ access to and benefits from superannuation must be increased levels of financial literacy. This financial literacy challenge is not unique to Indigenous Australians. However, English literacy in rural and remote Australia is often low among Indigenous Australians thus adding an additional layer of complexity. The Northern Territory, for example, is very culturally and linguistically diverse. Many among its Indigenous population do not speak English well and literacy levels are low. According to the Australian Bureau of Statistics, 16.6 percent of Aboriginal and Torres Strait Islander language speakers report that they do not speak English well or at all.4
With this in mind, the swathes of paper and, more recently, written digital content that superannuation funds have traditionally used to educate their members are ineffective vehicles for communication.
Mobile technologies, however, are ubiquitous in Indigenous communities. The Indigenous population is a young one with a median age of 21 years and a high social-media uptake.5 Research suggests that, in some areas, Indigenous people appear to be even more enthusiastic users of social media than their non-Indigenous counterparts, demonstrating the importance of new technologies in maintaining Indigenous social networks.6
Research also confirms the rapid take-up of prepaid mobile phones in remote central and northern Australia, which are preferred for their cost and credit management features.7
The Tangentyere Council Research Hub and Central Land Council joint report on mobile phone use among remote low-income Indigenous people around Alice Springs found that 60 percent of those surveyed used phones for emergencies and family contacts noting that ‘for the majority, a mobile phone is considered a necessity, rather than a luxury’.8
This high uptake of mobile technologies is something that should be leveraged. Relevant content that already exists on ASIC’s Money Smart website9, for example, could be repurposed as smartphone audio visual content. Gamification of these educational materials would also work to remove English literacy barriers to comprehension and to reach younger Indigenous Australians.
The Australian Government’s Community Development Program (CDP) could also be leveraged as a channel for delivering financial literacy initiatives. The CDP is designed to equip Indigenous Australians with the necessary skills to join the workforce and ultimately receive superannuation. It therefore makes good sense to equip these individuals with the financial literacy required to manage their finances, including their superannuation, as they are preparing to enter the workforce.
A series of financial literacy sessions delivered by an accredited provider should be a mandatory component of the CDP, and associated employment agencies should be mandated to have at least one RG146 accredited staff member to enable the support of CDP participants with financial literacy issues.10
The CDP scheme’s reach is vast. It is delivered across 60 regions into more than 1,000 communities, which are dispersed across 75 percent of Australia’s landmass. These regions are typically characterised by weak labour markets, which make it difficult to find work or gain work experience and skills. There are nonetheless some 37,000 people supported by government in CDP jobs of whom 80 percent are Indigenous Australians. In each of the CPD’s 60 regions is a CDP provider that serves as a single point of contact for all participating workers and employers.
Financial literacy training could be delivered to all participating workers through CDP providers as an essential step towards job readiness, and towards either joining a superannuation fund for the first time or consolidating their new and existing accounts for investment and taxation purposes.
Identification is a problem for Indigenous Australians endeavouring to interact with regulated services. Many simply do not have a photographic proof-of-identification document like a drivers’ license or a passport. For those that do, certification and transmission to providers, including superannuation funds, can be problematic due to geographical remoteness, and lack of access to suitably qualified witnesses and professionals.
AUSTRAC recently made changes to the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Identification compliance program in recognition of the complexities that Aboriginal and Torres Strait Islander communities face.11
AUSTRAC has provided some direction to enable reporting entities, such as superannuation funds, to exercise flexibility with compliance to Chapter 4 of the AML/CTF Rules for Applicable Customer Identification Procedure.
Superannuation funds and insurers should consider the guidance that AUSTRAC provides for processes like simple identification questions, changes of address, changes of banking details, and death-benefit applications, which are usually established to align with the cultural norms of non-Indigenous Australians and are inappropriate for many Indigenous Australians.
The recalibration of these processes by accepting alternate identification documents such as referees’ statements, for example, can markedly reduce the likelihood of creating or exacerbating Indigenous disadvantage. AUSTRAC provides these alternatives so that financial services providers can be confident in providing flexibility for Indigenous members without falling foul of legal obligations or exposing themselves to disputes.
Indigenous Australian superannuation members are more likely to need access to fund options for the provision of monies in times of hardship. There are a number of measures that could ease the distress of Indigenous individuals facing hardship, while simultaneously assisting economically-depressed communities.
We propose that the Australian Government considers increasing the $10,000-per-annum limit for early access to superannuation savings in cases of severe hardship for Aboriginal and Torres Strait Islander superannuates. Severe financial hardship provisions should include situations where the member is unemployed in excess of a certain period of time and job prospects are low. Government assistance payments to farmers in situations of severe hardship form a precedent for this kind of provision.
We also recommend that the Australian Government Department of Human Services amend its hardship application processes by leveraging AUSTRAC’s identification provisions. A confirmation letter valid for only 21 days may be insufficient for an Indigenous applicant to complete due processes because of factors such as remoteness of location, and lack of access to appropriate witnesses and other documentation.
The industry needs to debate and further research the value of insurance within superannuation for Indigenous Australians. As this sector of the population suffers from poor health and longevity, it is arguable that the availability of cover in the event of death, or total and permanent disablement is a significant benefit. However, the cost associated with providing this product further erodes the already chronically-low superannuation balances of Indigenous Australians.
Aside from considering the appropriateness of providing an insurance benefit, the superannuation industry also needs to assess the impact of its processes and lack of cultural understanding for Indigenous Australian members making insurance claims. Changes should be considered to improve industry expertise and outcomes in this respect.
It should be noted, for example, that the nature of familial relationships within Indigenous communities often does not neatly align with the sorts of considerations trustees typically make in assessing beneficiaries for the purpose of benefit payments. These sorts of issues should be front of mind for trustees and their claims committees when making decisions regarding the payment of death, and total and permanent disablement benefits.
We recommend that trustees enlist an expert adviser to support its claims committee in considering all relevant aspects in arriving at claims decisions. We also recommend that trustees have at hand an expert adviser to support their claims management teams in appropriately and sensitively managing interactions with Indigenous members and their families at the time of claiming.
To this end, we recommend that claims committees and claims management teams participate in regular training to build their understanding and awareness of specific cultural considerations relevant to Indigenous Australian members. This would be a useful addition to the range of training topics offered by peak bodies within the industry.
2 For those born after 1 July 1964 or later, the preservation age is 60. For those born before 30 June 1960, the preservation age is 55. For those born between 1 July 1960 to 30 June 1964, the preservation age increases one year from 55 years of age to 60, depending on date of birth.
4 Australian Bureau of Statistics, ‘Census of Population and Housing’, 2011.
5 J Taylor, ‘Population and Diversity: Policy Implications of Emerging Indigenous Demographic Trends’, Centre for Aboriginal Economic Policy Research (CAEPR) Discussion Paper No. 283, Australian National University 2006, p. 7.
6 Studies by the Victorian Department of Education and Early Childhood Development (DEECD), 2010, and the State of Victoria’s Children, 2009, cited in F Edmonds, C Rachinger, J Waycott, P Morrissey, O Kelada and R Nordlinger, ‘Keeping Intouchable’: a Community Report on the Use of Mobile Phones and Social Networking by Young Aboriginal People in Victoria, Institute for a Broadband-Enabled Society (IBES), University of Melbourne, Vic. 2012, p. 6.
7 ACMA, Telecommunications in Remote Indigenous Communities, March 2008, pp. 46–47 and Tangentery Council Research Hub and CLC, Ingerrekenhe Antirrkweme, Mobile Phone Use Among Low Income Aboriginal People: a Central Australian Snapshot, 2007, p. 6.
8 Tangentery Council Research Hub and CLC, Ingerrekenhe Antirrkweme, Mobile Phone Use Among Low Income Aboriginal People: a Central Australian Snapshot, 2007, p. 6.
10 RG146 sets out the competency requirements for providers of general and personal financial advice.