A promotional offer to members of a super fund exposed the grey areas of superannuation regulation, as the industry debates whether bonus frequent flyer points schemes breach the sole purpose test.
AustralianSuper is currently offering 20,000 Qantas points to members of the airline's frequent flyer program if they join the fund. Some industry participants claim this is a breach of the Superannuation Industry Supervision Act's sole purpose test.
Speaking to Financial Standard, SuperConcepts' interim chief executive Adrian Urquhart says the SMSF service provider wants to be on the same playing field as the large industry funds.
"I think we just want to get some clarity and a level playing field across these things and SMSFs were subject to a number of criticisms with the access to the discount card."
What Urquhart refers to is a previous offer whereby holding Coles Myer discount card shares within their SMSF secured fund members a discount card at the former retail behemoth.
The scheme attracted the attention of both APRA and the ATO, and was subsequently banned in 2002 for being inconsistent with the sole purpose test.
"This [Coles Myer offer] was quite topical at the time and was not well received by the regulators. If this [AustralianSuper offer] is okay, then why is it okay? If this is not okay, then why is it not okay?" he asks.
XY Adviser co-founder Clayton Daniel questioned whether ASIC would probe AustralianSuper's offer, given its renewed commitment to enforcement following the Royal Commission.
"ASIC is going after the banks. What about industry funds that are remarkably close to contravening the sole purpose test?" he asks.
Speaking to Financial Standard, Daniel said the scheme has the potential to encourage retirement savers to churn in and out of funds purely for benefits like Qantas points.
"It opens up a huge can of worms in that the opportunities now to acquire new members include the ability to give financial reward," Daniel said.
"Let's say I'm an 18-year-old kid and I've got $5000 in an account somewhere, and then five super funds promote '$100 gift card if you sign up with us,' and then I just roll $1000 across five different accounts."
"If the opportunity exists to do this, then it will happen," he says.
Urquhart is concerned AustralianSuper's scheme sees existing members pay for a benefit they will never experience.
"Essentially, existing members of the pooled fund are paying for points to give to new members of the fund, and it doesn't appear to be consistent with the sole purpose test, nor the recent commentary from the Royal Commission," Urquhart says.
But the $140 billion industry fund disagrees, telling Financial Standard the offer is in the best interest of members.
This is an abstract of a story first published in the latest print issue of Financial Standard. You can view the full article on our free iPad app.