What can I tell my employees about making a choice of superannuation fund?
Decisions people make about their superannuation can have long-term consequences, directly affecting how much money they have to live on in retirement. This is why it is important that only people who are appropriately qualified and trained to do so advise on superannuation issues. Generally, under the Corporations Act 2001 (the Corporations Act) only those who are licensed (i.e. hold an Australian financial services licence (AFS licence)) or authorised (i.e. act as the representative of an AFS licensee) are allowed to give such advice. Most employers will not be licensed or authorised to give superannuation advice.
This information sheet addresses the issues employers face in communicating to employees about choice of superannuation fund (‘super choice’) and provides some general guidance about what you can say to your employees about super choice without breaking the law.
If, after reading this document, you are still unsure about what is allowed, we suggest you seek professional advice.
The principles outlined here may also apply to other persons who are not licensed or authorised under the Corporations Act 2001 to give financial product advice, such as where union officials who wish to give information about super choice to union members.
Be careful not to give financial product advice
As an employer you should avoid making communications (whether oral or in any other form) to employees that amount to financial product advice about the employees’ superannuation arrangements. Most employers will not be licensed or authorised to give such advice. Further, uninformed advice could be misleading or inappropriate to your employees’ circumstances.
You are not required to give advice about employees’ superannuation arrangements to meet your choice of fund obligations. You can, however, give employees factual information about superannuation and super choice. You can also refer employees to licensed or authorised providers of superannuation advice, provided you disclose any benefit you receive for making the referral.
What is financial product advice?
Under the Corporations Act, financial product advice is a recommendation or statement of opinion (or a report of either) that:
- is intended to influence a person or persons in making a decision in relation to a financial product or class or products; or
- could reasonably be regarded as being intended to have such an influence.
People who regularly give financial product advice about superannuation or any other financial product generally need to hold an AFS licence or act as the representative of an AFS licensee.
Whether or not something is financial product advice will always depend on the particular circumstances. Statements about things like the following could be financial product advice:
- joining, or making contributions to, a superannuation fund;
- making additional contributions to a super fund, including by salary sacrifice;
- rolling accumulated superannuation into or out of a fund; and
- selecting particular investment or insurance options within a superannuation fund.
You need to be careful that statements you make to employees about superannuation or super choice are not financial product advice. If you give financial product advice without being licensed or authorised to do so, or if what you say is misleading, you may be breaking the law. Moreover, advice that is inappropriate to employees’ circumstances could influence employees to make choices that cost them money.
What will happen if you give financial advice?
In the early stages of super choice, ASIC will take a balanced approach with employers who inadvertently provide superannuation advice without being licensed or authorised to do so. This does not apply to those who deliberately fail to comply with the law.
What is factual information?
Factual information is information that includes no recommendation or opinion element, nor any actual or inferred intention to influence a person making a decision in relation to their superannuation.
Factual information about super choice could include information about:
- employees’ rights and employer obligations under super choice;
- how employees can tell their employer what superannuation fund or retirement savings account (RSA) they want the superannuation guarantee contributions from the employer paid into; or
- the employer fund into which the employer will pay superannuation guarantee contributions, unless the employee chooses another superannuation fund or RSA for those contributions.
It is important to note that just calling something factual information is not enough to stop it being financial product advice if it really is a recommendation or opinion that is intended to be, or can be regarded as being, influential.
One way of providing factual information to your employees is to refer them to copies of the Australian Government’s consumer information booklet Super Decisions, prepared by ASIC.
You can refer employees to a person who is lawfully able to provide financial product advice
You do not need to be licensed or authorised to merely refer a person to a licensed or authorised provider of financial services, including financial product advice. You must, however, disclose any benefits (including commission) that you or your associates may receive by reason of the referral. This disclosure must be at the same time, and in the same form, as the referral.
You can ask a superannuation fund provider to make a presentation to your employees
Allowing a superannuation fund provider to make a presentation to your employees at work is not providing financial product advice. However, you need to be careful that your communications to employees about the presentation cannot be understood as endorsing or criticising the fund, or they could amount to financial product advice about superannuation.
You can give employees information about the employer fund
You can give your employees information about your employer fund. However, you must be careful not to discuss the merits or shortcomings of the employer fund with your employees, or you may find yourself giving financial product advice.
You can give your employees a copy of, or refer them to, the Product Disclosure Statement (PDS) that the provider of the employer fund will have had to prepare for the fund. Your employees could also obtain the PDS from the employer fund provider directly. However, if your employees want an explanation of the PDS or information about how the employer fund differs from other funds, you should refer them to the fund provider, or suggest they obtain their own advice from a person who can lawfully provide financial product advice about superannuation.
You can tell your employees why, as a matter of fact, you believe the employer fund meets your obligations as an employer under super choice. Contact the Super Choice Infoline on 13 28 64 or visit www.superchoice.gov.au if you have questions as an employer about how to comply with super choice in your organisation.
What should HR staff and people managers tell employees about super choice?
You should make sure that people within your organisation who are responsible for administering super choice, or who manage other people, understand that they should not make statements to your employees that amount to financial product advice about superannuation, otherwise they may be breaking the law.
For more information about super choice:
- go to ASIC’s website at www.asic.gov.au/superchoice;
- download Super Decisions, the consumer information booklet prepared by ASIC. Super Decisions explains the basics of superannuation and provides guidance on super choice and how to compare funds. You can provide your employees with a link to Super Decisions online, or you can print it off and distribute copies to your employees. For free copies in booklet format, call 13 28 64.
Our consumer website, MoneySmart has useful information about choosing a superannuation fund.
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. Omission of any matter on this information sheet will not relieve a company or its officers from any penalty incurred by failing to comply with the statutory obligations of the Corporations Act and the Corporations Regulations 2001.
You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 89 (INFO 89). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.