In what represents some of the first legislation flowing from the final report of the Royal Commission, the Federal Government has moved to expose superannuation fund trustees to civil penalties for breaches of their best interests obligations.
The move appeared directly aimed at industry funds which have spent money entertaining employers to garner support for their default products.
The Treasurer, Josh Frydenberg confirmed that the Government had moved on the issue via amending two superannuation bills currently before the Parliament and likely to be dealt with before it rises at the end of next week.
Frydenberg said the amendments reflected Recommendation 3.7 of the Royal Commissions final report as well as recommendation 3.6.
“The Commissioner remarked that the existing ‘enforcement measures are less direct than they should be, given the central importance of the obligations’,” Frydenberg said. “The Government has already introduced legislation that would see directors subject to civil penalties for breaches of their best interests obligations and now we are immediately acting on Commissioner Hayne’s recommendation that these penalties extend to trustees.”
“The Commissioner also recommended [Recommendation 3.6] that trustees be prohibited from ‘treating’ employers in return for ‘having the recipient nominate the fund as a default fund or having one or more employees of the recipient apply or agree to become members of the fund’,” the Treasurer’s statement said.
He said the Commissioner had found, “The evidence given in the Commission showed that some large funds spend not insignificant amounts to maintain or establish good relationships with those who will be responsible for nominating the default fund for their employees.”
“The Government is also immediately acting on this recommendation, amending the Superannuation Industry Supervision Act 1993 to prohibit trustees from ‘treating’ employers,” Frydenberg said. “The amendment tabled will be made to the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017.”
“This legislation is currently in the Senate and the Government calls on Bill Shorten and the Labor Party to support the amendment which acts on two of Commissioner Hayne’s recommendations and would immediately enhance accountability of superannuation funds and strengthen protections for consumers.”
