Explaining super fund stapling to your employees
On 1 July 2021, some of the most significant changes to Australia's super system in years came into effect. And, as an employer, it's important to understand your new responsibilities to your employees.
The Government's super reform package known as Your Future, Your Super, contains four key components:
- Super fund stapling.
- YourSuper – an interactive online comparison tool for individuals to compare MySuper funds, the super fund’s default option.
- Annual performance tests for super funds.
- A change to the duty of super fund trustees to act in the best financial interests of members.
However, it's the ‘stapling’ component that's likely to have the most effect on your responsibilities to employees.
What is fund stapling?
A stapled fund is a super account that is linked or ‘stapled’ to an individual employee, which follows them as they change jobs. From 1 November 2021, any time employees move to a new employer, they must be offered choice of fund. If an employee doesn't choose a super fund when they change jobs you, as their employer, will be required to contact the ATO and ask for information about their stapled fund. If they don't choose a fund, and if they don't have a stapled fund, you will need to pay their super contributions into your company's default fund.
It is important to note that these requirements apply to all new employees, even if a current enterprise agreement or workplace determination specifies that all contributions are to be made to a particular fund.
Before 1 November 2021, employees needed to notify their new employer if they wanted to stay with their chosen fund. Stapling aims to reduce people having, and paying fees for, multiple super accounts they don't need. It also means a new account isn't automatically created every time an employee starts a new job.
Employees can still nominate a preferred fund at any time using a Choice of Fund form. If they do this, you'll need to pay their super contributions into their chosen fund.
Explaining the changes
While it's up to your employees' super fund to communicate the changes to them, as their employer, they may come to you with questions.
To ensure you comply with your legal obligations, the Australian Securities and Investments Commission (ASIC) has provided a list (summarised below) on what you, as an employer, can and cannot do when communicating with your employees about their super options. If you fail to comply, ASIC can take action against you and penalties may be applied.
Employers can:
- give factual information, including documents that relate to super. Factual information offers no recommendation or opinion, nor does it try to influence a person's decision. It can include:
- employees' rights and employers' obligations under super choice
- how employees can tell their employer what fund they want their super guarantee contributions to be paid into
- what happens if an employee doesn't choose a fund.
An employer can also provide information and documents to employees, such as the most recent copy of the ATO's super standard choice form. - refer employees to information on Government websites, including the YourSuper comparison tool and MoneySmart as this is a simple way for employees to compare MySuper products.
- ask a super fund to present to employees. While you can ask any fund to present to your staff, you need to be careful your employees understand that such a presentation is not an endorsement nor a criticism of the fund as this can be viewed as providing financial product advice.
- refer employees to a licensed financial adviser. A referral to a licensed adviser is a good idea but, you must disclose any benefits that you or any associates may receive from the referral.
Employers can't:
- give financial product advice or mislead employees about super products. Those who give financial advice generally need to hold an Australian financial services licence, and this isn't something most employers have. If you give advice without being licensed or authorised to do so, you may be acting illegally.
- mandate, recommend or influence their employees to choose a particular fund. If your employee doesn't choose a fund or have a stapled fund, then you need to select your company’s default super fund to pay their super contributions. However, you can't take any action to make them choose that particular fund, or any other fund, as this is against the law.
- make unsolicited offers to employees or ask them to apply for a super product during real-time contact, such as on the phone or in a meeting. Actions such as these amount to ‘hawking’ and can result in employees buying products that don't meet their needs. In this situation, hawking occurs if you offer your employees a super product or ask them to apply for one when they haven't asked to.
After their own home, super is generally the largest asset someone will own. So, any decisions employees make can greatly affect the amount they have when they retire. As an employer, it's important that you don't communicate information or take any action that is inappropriate as you could risk breaking the law and it also may have adverse consequences for an employee’s retirement savings.