In a public statement, ASIC said the guidance which is set out in Infosheet 241 draws attention to the recently amended section 68A of the Superannuation Industry (Supervision) Act 1993.
It also illustrates how section 68A applies in common scenarios to ensure that superannuation trustees understand their legal obligations.
Section 68A prohibits a trustee, or its associates, from using goods or services to influence employers to nominate a default superannuation fund for employees, or to encourage employees to choose or retain a particular superannuation fund.
The scope of section 68A and the penalty for breach increased as a result of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019.
The amendments were preceded by a recommendation by the financial services royal commission for changes to be made to section 68A to improve its enforceability and the penalties applying for breach of the prohibition.
“This section changed in scope and penalty on 6 April 2019, enhancing ASIC’s powers to take action in relation to employer inducements by superannuation trustees,” the corporate regulator explained.
ASIC commissioner Danielle Press said superannuation trustees must understand that providing inducements to employers to influence them in their choice of a default super fund is generally illegal.
“The recent amendments mean civil and criminal penalties can be imposed on superannuation trustees who don’t comply with the law,” Ms Press said.
ASIC noted that the financial services royal commission found that some large superannuation trustees had been spending significant amounts to maintain or establish good relationships with employers or their officers responsible for nominating the default fund for employees.
“Reducing improper influences on employer decision-making is critical to addressing potential consumer harms,” ASIC said.
“While employers are not required to consider their employees’ best interests when making decisions on default super funds, their decisions can significantly impact employees’ retirement income and potentially affect their future financial security.”
ASIC said it is concerned because employees who are not engaged with their super are particularly vulnerable to negative financial outcomes as a result of poor employer decision-making.
“We expect the recent changes to the law will ensure that super trustees are promoting their products to employers on their merits, rather than the inducements they can provide,” it said.
Some of the deals and incentives on offer by public offer funds have previously come under criticism from the SMSF sector, with SMSF service providers and professionals calling for greater clarification around the sole purpose test to ensure a level playing fields between SMSFs and other super funds.
Back in February this year, SMSF Adviser reported that AustralianSuper had been offering Qantas Frequent Flyer to members who joined AustralianSuper for the first time and contributed $350 within the first six months of joining.
Former SuperConcepts chief executive Adrian Urquhart said that with inducements and deals from APRA-regulated funds gaining momentum, the circumstances under which a fund is permitted to offer inducements with a quantifiable financial value to attract new members needs to be clarified further, especially where they are funded by existing members.
If an SMSF firm was to offer shopper points or other similar incentives to individuals who set up an SMSF and have it administered by that firm, Mr Urquhart noted that it wouldn’t take long for regulators to intervene and refer them to section 62 of the SIS Act.
Perhaps while we are here ASIC and APRA could look into the issue of Australian Super inducing members of other superannuation funds to commence an account with Australian Super for Qantas Points. This infringes on so many laws and can you imagine if a planner sought to give an inducement of points to commence a SMSF – all hell would break loose.