ASIC Advises Businesses to Be Wary of Default Funds with Inducements
The Australian Securities and Investments Commission (ASIC) has updated its guide to help employers select a default superannuation fund for their employees. The guide sets out a range of factors for employers to consider when deciding on a default super fund for employees (eg. fees, investment options, fund performance and insurance).ASIC also encourages employers to be wary of trustees offering inducements for the employers to pick their funds. Inducements may take any form, including corporate hospitality, holidays and discounted rates on products or services. ASIC notes that the superannuation law prohibits incentives being offered to employers on the condition that their employees join a fund.
“Employers should not choose a default fund on the basis of an inducement. I strongly encourage employers who are concerned they may have been offered an inducement that is illegal to contact ASIC”, Commissioner Greg Tanzer has said.
Case Studies on Super Fund Offers
ASIC offers the following case studies.
| Jane’s super fund offers tickets to events Jane has just started a small business and is considering what default fund is appropriate for her staff. Jane makes some enquiries with an industry fund about what they offer. The fund tells Jane they will send her tickets to a major sporting event if she agrees to sign up new employees to their default fund.
Jane is worried that she shouldn’t be accepting these gifts and selects another fund for her sales team.
| Michael’s super fund offers discounts Michael runs a small manufacturing business. He is considering selecting a new default super fund for his staff. Michael is a long-term customer of ABC Bank that also offers a super fund. In conversations with the bank, they tell Michael that if he signs up some of his employees to their super fund, the bank will reduce the interest rate on Michael’s business loan and offer him a new overdraft facility.
This raises alarm bells for Michael because even though he has a good relationship with the bank, he knows the bank is not allowed to offer him this type of inducement. Michael decides not to go with ABC Bank’s super fund.
ASIC Reminders on Super Funds
ASIC reminds employers to focus on what’s best for their employees and to take the time to do their research. ASIC also warns employers to be careful when one fund says that it is better with insurance, returns or fees than another – these comparisons may not compare like with like.
ASIC says the updates to its guide follow a review of some retail and industry super trustees to assess their compliance with s 68A of the Superannuation Industry (Supervision) Act 1993 (the rule prohibiting employer “kick-backs”). ASIC will continue to monitor employer inducements and may consider further enquiries to better understand employers’ experiences when dealing with super trustees and their associated businesses.
The Super for Employers guide is available on ASIC’s MoneySmart website – Click Here
If you have any questions, please contact our office.
Article Supplied by: Thomson Reuters
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