ASIC has given some guidance on what super funds can offer to employers, after laws were tightened following a Royal Commission recommendation driven by spending on entertainment and sporting events.
“Superannuation trustees must understand that providing inducements to employers to influence them in their choice of a default super fund is generally illegal,” said ASIC Commissioner Danielle Press.
“The recent amendments mean civil and criminal penalties can be imposed on superannuation trustees who don’t comply with the law.”
Following from a recommendation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, section 68A of the SIS Act was enhanced up to allow for civil and criminal penalties for super fund trustees using goods or services to influence the decision of employers of default super fund.
The Royal Commission found that some large super funds were spending “not insignificant” amounts on establishing and maintaining relationships with people who choose default funds, including on entertainment and sporting events.
Press continued: “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 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. ASIC’s new guidance will make it easier for them to understand their new obligations, and not engage in potential misconduct.”
ASIC gives some examples of how the new s68A could apply – including saying that giving tickets to a “sporting event grand final” would likely be a breach of s68A, and that discounted insurance premiums for a business choosing the fund owned by the same financial services group would also likely be a breach. A fund update over a “modest lunch” is unlikely to be a breach, and educational seminars on superannuation topics may not be a breach. Other examples say that clearing house facilities or discounts on admin fees for employees would not be breaches.
ASIC says it has “no power to give relief from the prohibition in section 68A”, but does point to exemptions – including business loans made on a commercial arm’s length basis, providing for the forwarding of contributions (a clearing house), providing an employer or employees with “advice or administrative services relating to the payment of superannuation contributions”, and “goods or services available to employees on at least as favourable terms as the supply of good or services to the employer”.