On Friday 15 October 2021, ASIC released an updated information for employers and trustees about changes affecting the distribution of superannuation products as a result of recent law reforms (refer Background).
Employers have an obligation to ensure that superannuation guarantee contributions are paid on time to their employees’ superannuation fund of choice.
ASIC’s Information Sheet 89, Communicating with employees about superannuation fund choice: what you can and cannot do (INFO 89) provides guidance to employers about how they can communicate to their employees about superannuation choices without breaking the law.
ASIC Commissioner Danielle Press said, ‘Decisions consumers make about their superannuation can have long-term consequences and directly affect how much money they have to live on in retirement. It is important that employers do not take steps that are inconsistent with laws designed to promote good choices by consumers about their superannuation fund.
‘Superannuation trustees should not encourage employers to act in a manner that is contrary to the law to promote their funds. Recent law reform has affected a variety of obligations concerning marketing and distribution of superannuation products, including via employers. Trustees should be checking if the way they seek to attract and retain employees as members is appropriate, in light of changes to the law and other relevant obligations,’ she said.
ASIC has also updated Information Sheet 241: Prohibition on influencing employer’s superannuation fund choice (INFO 241), which provides guidance to superannuation trustees about the prohibition on using inducements to influence employers in their choice of a default fund or to encourage employees to choose or retain membership of a fund.
ASIC recommends that trustees familiarise themselves with the guidance in both information sheets to ensure appropriate engagement with employers and employees.
ASIC will conduct a thematic review this financial year on how trustees use employers to distribute superannuation products. Following the review, ASIC may consider regulatory action where misconduct causing consumer harm is identified.
The law reforms affecting the distribution of superannuation products include product design and distribution obligations, restrictions on the unsolicited selling of financial products (hawking), and the ‘stapling’ measure, which is a part of the Your Future Your Super (YFYS) package. The YFYS package also made changes affecting the prohibition in section 68A of the Superannuation Industry Supervision (SIS) Act 1993.
Information Sheet 89: Communicating with employees about superannuation fund choice: what you can and cannot do
INFO 89 has been expanded beyond a focus on employers inappropriately providing financial advice. The changes to INFO 89 reflect:
- the revised hawking prohibition, which took effect on 5 October 2021. Employers should take care not to contravene the hawking prohibition, particularly when engaging with new employees about their choice of fund.
- the design and distribution obligations (DDOs), which also took effect on 5 October 2021, including amendments to DDOs recently announced by Government. For employers, this means they are not a distributor when providing a product disclosure statement for their default fund to an employee, even if the employee has a ‘stapled’ superannuation fund. ASIC has provided interim relief to give effect to this amendment before the legislative changes are made.
- the ‘stapling’ measure, which commences on 1 November 2021. This measure means that where an employee does not choose a fund, an existing super account is linked or ‘stapled’ to the individual so that it follows them as they change jobs.
Information about the ‘stapling’ measure and how the process is managed by the Australian Taxation Office can be found at Request stapled super fund details for employees.
Information Sheet 241: Prohibition of influencing employers’ superannuation fund choice: section 68A of the SIS Act
INFO 241 explains the prohibition in section 68A of the SIS Act, which forbids a trustee or its associates from using improper inducements to influence employers in their choice of default fund. It also explains the exemptions from the prohibition, and applicable penalties.
The changes to INFO 241 reflect:
- the removal of an exemption to section 68A by the Superannuation Industry (Supervision) Amendment (Your Future, Your Super—Improving Accountability and Member Outcomes) Regulations 2021). The exemption allowed a trustee to supply or offer goods or services to an employer on the basis that the supply or offer was available to all the employer’s employees.
For more information about:
- the prohibition that aims to protect consumers from unsolicited offers of financial products, see RG 38 The hawking prohibition.
- the design and distribution obligations and ASIC’s expectations for compliance, see RG 274 Product design and distribution obligations.