ASIC has issued guidance to superannuation trustees today, reminding them that using improper inducements to influence employers in their choice of default fund is illegal.
The guidance set out in Infosheet 241, draws attention to the recently amended s68A of the Superannuation Industry (Supervision) Act 1993. It also illustrates how s68A 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. 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.
"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," ASIC Commissioner Danielle Press said.
Earlier this year, the Financial Services Royal Commission found that some large superannuation trustees were 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.
"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," Ms Press said.
Infosheet 241 is available on the ASIC website.
Background
The scope of s68A 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 s68A to improve its enforceability and the penalties applying for breach of the prohibition (see recommendation 3.6, Royal Commission's Final Report dated 1 February 2019). ASIC strongly supported this recommendation.
