Communicating with employees about choice of superannuation fund: What you can and cannot do
This is Information Sheet 89 (INFO 89). It is for employers. It is also relevant for superannuation trustees, payroll providers, superannuation clearing houses and others who engage with employers or employees. This could include union officials who wish to give information about choice of superannuation fund to union members.
This information sheet provides general guidance about:
- how you can communicate to your employees about superannuation choices without breaking the law
- what you should avoid saying or doing. Importantly, it highlights that employers should be careful not to provide financial product advice or engage in distributing superannuation products on behalf of others.
Decisions employees 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 advise on superannuation issues.
It is also important that employers do not take actions that are inconsistent with laws designed to promote appropriate choices by employees about their superannuation fund.
This information sheet does not provide guidance on every obligation you have as an employer.
Background: What is the role of employers in relation to superannuation?
Employers have obligations to ensure that superannuation guarantee contributions are paid, on time, to the superannuation fund that meets their choice of fund obligations.
From 1 November 2021 for most employers, you need to make superannuation guarantee contributions for employees who start from that date into:
- the fund chosen by the employee
- if no fund is chosen – the 'stapled super fund' notified by the Australian Taxation Office (ATO) for the employee, or
- if the ATO advises that there is no stapled super fund – your default superannuation fund or another fund that meets your choice of fund obligations.
A stapled super fund is an existing superannuation account which is linked to an individual employee who does not make a choice of fund when they change jobs. A defined benefit fund can be provided as a stapled super fund but some defined benefit accounts may not be able to accept contributions from all employers.
Note: For more information about these obligations, and how the process is managed by the ATO, see Offer employees a choice of super fund on the ATO website.
Table 1 summarises what you can do, and what you should not do, when communicating with your employees about choice of superannuation fund ('super choice').
Table 1: Overview
What you can do
What you should not do
Note: If employers fail to comply with the laws administered by ASIC outlined in this information sheet, ASIC would, in deciding whether to take action, take into account whether the misconduct is inadvertent or deliberate as well as other relevant circumstances. ASIC would regard seriously conduct that amounts to deliberately failing to comply with the law.
While you cannot give financial product advice to your employees, you can give them factual information about superannuation and super choice.
Factual information is information that has no recommendation or opinion element, or any intention (actual or inferred) to influence a person making a decision about their superannuation.
Factual information about super choice could include information about:
- employees' rights and employers' obligations under super choice
- how employees can tell their employer what fund they want the superannuation guarantee contributions from the employer to be paid into
- what will happen if the employee does not choose a superannuation fund.
It is important to note that just calling something 'factual information' is not enough to prevent it being financial product advice. If it actually is a recommendation or opinion that is intended to be (or can be regarded as being) influential, it will be considered to be financial product advice.
One way of providing factual information to your employees is to refer them to Choosing a super fund on Moneysmart.gov.au.
You can give information and documents relating to superannuation
Giving your employees documents and forms, such as the most recent copy of the ATO's Superannuation standard choice form (standard choice form), is permitted, and in many cases required by law.
You can also:
- tell your employees why, as a matter of fact, you believe paying contributions to the employees' fund meets your obligations as an employer under super choice
- give employees information about the default superannuation fund including information that the provider of the default fund has prepared, such as the Product Disclosure Statement (PDS).
In giving this information, you should:
- be careful not to discuss the merits or shortcomings of the default or stapled super fund or other superannuation products, or you may find yourself giving financial product advice. Any communication you make in relation to superannuation must not be misleading and should be factual.
- avoid providing material in a way that amounts to hawking.
If your employees want an explanation of the PDS or information about how the default superannuation 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 refer your employees to the YourSuper comparison tool on the ATO website. This comparison tool is a simple way for your employees to compare MySuper products and help them choose a fund that meets their needs.
You can also refer employees to Choosing a super fund at Moneysmart.gov.au.
Allowing a superannuation fund provider to present to your employees 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. This could amount to financial product advice about superannuation.
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 that you or your associates may receive by reason of the referral. This disclosure must be made at the same time, and in the same form, as the referral.
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.
People who regularly give financial product advice about superannuation, or any other financial product, generally need to hold an Australian financial services (AFS) licence or act as the representative of an AFS licensee.
Most employers will not be licensed or authorised to give such advice. If you give financial product advice without being licensed or authorised to do so, you may be breaking the law. Also, uninformed advice could be misleading or inappropriate to your employees’ circumstances, costing them money if they act on the advice.
What is financial product advice?
Financial product advice is a recommendation or statement of opinion (or a report of either) that:
- is intended to influence a person (or persons) who is making a decision about a financial product or class of products, or
- could reasonably be regarded as being intended to have such an influence.
Whether or not something is financial product advice will always depend on the particular circumstances. Statements about matters such as the following could be financial product advice:
- joining, or making contributions to, a particular superannuation fund
- the advantages or disadvantages of making additional contributions to a superannuation fund, including by salary sacrifice
- rolling accumulated superannuation into or out of a fund, and
- selecting particular investment or insurance options within a superannuation
You should not mandate, recommend or influence your employees to choose a particular superannuation fund
Employers are required to select a default superannuation fund that they will pay an employee's superannuation into if the employee has not chosen a fund or does not have a stapled super fund. Details about the default superannuation fund will be recorded as the 'nominated superannuation fund' on the ATO's standard choice form.
You must not mandate, recommend or influence your employee to choose this or another fund. If you do, you may be breaking the law.
Be careful not to inadvertently act as a distributor of superannuation products
You will be considered to be a distributor of superannuation products if you:
- give your employees a PDS for a superannuation fund (other than the default fund or the stapled super fund for an employee), or
- engage in other marketing activities for superannuation products that are considered ‘retail product distribution conduct’ within the meaning of the Corporations Act 2001 (Corporations Act). This would include providing financial product advice about superannuation products to employees or actively helping employees in all the steps involved in an employee acquiring a superannuation product.
But you will not be considered to be a distributor of superannuation products if you:
- merely comply with your obligation as an employer to provide the most recent copy of the ATO's standard choice form
- as required of most employers – arrange for superannuation guarantee contributions to be made into:
- the fund chosen by your employee
- if no choice has been made – the stapled super fund for the employee, or
- if no choice has been made and there is no stapled super fund – your default superannuation fund, or
- provide factual information about superannuation products, such as the name of the employer's default fund.
If you are considered to be a distributor of superannuation products, you will be subject to additional obligations under the Corporations Act. For this reason, you should not be a distributor of superannuation products unless you have carefully considered your legal obligations.
You should be mindful not to exert pressure on your employees in relation to choosing a superannuation fund.
You will be engaging in hawking if during a telephone conversation, meeting or other real-time contact you offer your employee a superannuation product or ask your employee to apply for a superannuation product when they have not asked for this.
The hawking prohibition aims to protect people from unsolicited offers of financial products made during real-time interactions, which often contribute to people buying products that do not meet their needs.
The examples in Table 2 highlight some common scenarios and issues that may arise during the employee onboarding process. The examples are illustrative only and are not a substitute for careful consideration of particular facts and circumstances.
Table 2: Examples of possible hawking scenarios
Conduct likely to constitute hawking
Conduct unlikely to constitute hawking
You should ensure that your staff and contractors do not risk breaking the law
You should ensure that your staff and contractors who might be involved in any discussions with employees on their superannuation on your behalf 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.
You should also ensure that these staff and contractors do not risk breaking the law by engaging with your employees in a way that amounts to hawking or distributing of superannuation products.
Where you can get more information
For more information about super choice and other legal obligations referred to in this information sheet, see:
- the 'Super' section of the ATO's website ato.gov.au/super and the webpages Offer employees a choice of fund and Request stapled super fund details for employees, or call the ATO on 13 28 64
- ASIC's webpage Superannuation for employees and employers
- Choosing a super fund on Moneysmart.gov.au
- RG 38 The hawking prohibition
- RG 244 Giving information, general advice and scaled advice
- RG 274 Product design and distribution obligations
- INFO 241 Prohibition on influencing employers' superannuation fund choice: section 68A of the SIS Act
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.