Notifying members about superannuation transfers without consent
This is Information Sheet 90 (INFO 90). It answers the following questions:
- What changes or events must be notified?
- When do I need to notify members?
- What about information already given in the PDS?
- What information do I need to give?
- How should I notify members?
The Corporations Act 2001 (Corporations Act) provides a framework for notifying members of superannuation funds about ‘material changes’ or ‘significant events’. Section 1017B imposes an ongoing obligation on issuers of financial products to notify the holders of a product about any material change to a matter or significant event that affects a matter. This is information that would have to be specified (or incorporated by reference) in a Product Disclosure Statement (PDS) or shorter PDS, if you prepared one on the day before the change or event occurred. For superannuation products, these events include the transfer of a member to a different category of membership or to a different fund: see section 1017B(5E).
In our view, any decision that fundamentally affects a member’s investment, including a decision to transfer a member’s benefit without their consent, is a change or event that must be disclosed.
For example, as a superannuation trustee, you must notify members when you decide to:
- transfer member benefits into a successor fund under regulation 6.29 of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations)
- transfer member benefits from one category to another within a fund (e.g. a member that was in an employer-sponsored division has left that employer and must be moved to another personal division of the same fund that is not linked to any particular employer), or transfer member benefits to a different fund (see section 1017B(5E))
- transfer member benefits to the Australian Taxation Office (ATO) under section 22 of the Superannuation (Unclaimed Money and Lost Members) Act 1999 (Unclaimed Money Act), or
- seek approval from the Australian Prudential Regulation Authority (APRA) to transfer benefits under Part 18 of the Superannuation Industry (Supervision) Act 1993 (e.g. a merger of two superannuation funds).
You must notify members of material changes or significant events at various times relating to the change or event, as set out in Table 1: see section 1017B(5).
Table 1: Time for giving notice of a material change or significant event
|Nature of change or event||Time for giving notice|
|Change or event is not an increase in fees or charges||Before the change or event occurs, or as soon as practicable after the change or event occurs (not more than three months after)|
|Change is an increase in fees or charges||30 days before the change takes effect|
We expect these to be minimum requirements for providing significant event notices, and expect you will provide additional disclosures to members, depending on the circumstances of the impending change or event. In our view, ‘as soon as practicable’ means that you must be able to demonstrate that you have given the notice at the first reasonable opportunity.
If the change or event might result in an increase in fees or charges, these timing requirements apply to the change or events as if it would result in an increase in fees or charges: see section 1017B(7). Superannuation trustees should be alert to the possibility that a material change or significant event, including a transfer, might result in an increase in fees or charges and should, accordingly, disclose the change or event at least 30 days before it takes effect.
When a decision is made to transfer member benefits, you must notify members as soon as practicable before the transfer of benefits takes place: see, for example, section 1017B(5A). This is because a fund member would reasonably expect to be informed of such an event before it occurs.
Although there are circumstances when you can notify members more than three months after making a decision, this option is unlikely to be available to you when decisions relate to member transfers without consent.
Notifying members of a change or event before it occurs enables members to make an informed decision about whether to exercise their portability rights to transfer or roll over benefits under choice of superannuation. Delayed notice of such a change or event would, in our view, be adverse to a member’s interests, and members would be expected to be concerned about the delay in receiving such information: see section 1017B(6).
Delaying making an ‘official’ decision will not give you more time to notify members about changes you have been actively working towards. The existence of an official decision does not determine whether there has been an actual decision (which is a material change or significant event) that requires disclosure. Whether there has been a material change or significant event will depend on all the circumstances. For example, if you are taking the steps necessary to plan for and implement member transfers, this is a change or event that must be disclosed to members.
Your ongoing obligation to disclose material changes and significant events is additional to the PDS disclosure obligations. This means that, if information about a matter would have to be included in a PDS or shorter PDS, if you prepared one on the day before the change or event occurred, then members must be notified: see section 1017B(1) and (1A).
This is the case even if a PDS that has been provided to the affected members describes what would or might occur if such a change or event took place.
You must give members information that reasonably enables them to understand the nature and effect of the change or event: see section 1017B(4). This is an objective test. Disclosure that does not explain the full scope of the change, such as the differences between the two funds or two categories within a fund, would not satisfy this requirement.
To help members understand the material changes or significant events affecting them, the information you provide could include:
- informing the member about the Australian financial services (AFS) licensee’s intention to move their existing member account to a new specified product
- informing the member about the implications of the change, including the impact on their benefit, insurance, fees and insurance premiums, investment options and any other consequences
- providing the member with the opportunity to opt out of the transfer (if available) by advising the AFS licensee in a specified method
- if an opt-out opportunity is not available, notifying the member about what other options are available, such as the ability to exercise a choice of superannuation fund, and
- providing a copy of the PDS applying to the new product that the member will be transferred into.
Drip-feeding information about particular changes or individual events without explaining the consequences of the changes or events as a whole is not acceptable.
While sending notifications by mail may be suitable in all circumstances, you may choose to notify members electronically in some circumstances. Electronic disclosure is generally more cost-effective and may be used if it is appropriate in the circumstances and you can meet all the requirements for doing so: see also regulation 7.9.75B of the Corporations Regulations 2001 (Corporations Regulations) and Regulatory Guide 221 Facilitating digital financial services disclosures (RG 221).
The manner in which you choose to notify members must be appropriate in the circumstances, and you must ensure that it is effective. In deciding how to notify members, you should consider:
- the type of information the notice contains, including whether it contains personal information, general information or both
- whether members have online access behind a secure wall to their superannuation account, where a significant event notice containing personal information may be made available
- whether you have a member’s current email address
- whether you have a member’s current mailing address, and
- the normal practice that you follow, which members are used to, for issuing significant event notices and other disclosure.
If a trustee has an address for a member but is reasonably satisfied that the address is incorrect or has no address for a member, and has failed to locate the member despite taking reasonable steps to do so, they need not provide the member with a significant event notice: see section 1017B(7A) (as inserted by Part 14 of Schedule 10A to the Corporations Regulations). If the member’s address or location subsequently becomes available, the trustee must give the information to the member, but need do so only to the extent that the information is required to be given at the time when the address or location becomes available: see section 1017B(7B) and (7C) (as inserted by Part 14 of Schedule 10A to the Corporations Regulations).
Where can I get more information?
For more information, see:
- RG 221 Facilitating digital financial services disclosures
Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.
This information sheet was reissued in July 2021.