A panel of superannuation fund executives and experts has openly questioned whether superannuation funds which encourage people to join via offers of frequent flyer points are not only breaching the sole purpose test but also allowing members early use of their funds.
A roundtable conducted by Money Management’s sister publication Super Review during last week’s Conference of Major Superannuation Funds (CMSF) expressed concern that the offer of frequent flyer points by big industry fund, AustralianSuper, was entering worrying and unchartered territory.
Discussion of the AustralianSuper frequent flyer points offer came just a day after a panel discussed the sole purpose test contained within the Superannuation Industry (Supervision) Act and the fact that the Australian Prudential Regulation Authority (APRA) had never publicly acted on breaches of the legislation.
NGS Super chief risk and governance officer, Ben Facer said the offer of frequent flyer points to attract new members had raised a number of questions, particularly in terms of the way in which new members then used the frequent flyer points.
Mercer sales leader, Investments and Financial Services, Brian Zanker said that it appeared that by using frequent flyers, funds were “converting an asset of the fund which is meant to provide for their retirement into an immediate benefit”.
“To me that is not sole purpose,” he said.
“This is a really grey one, because existing members are funding a benefit to attract new members. How does that differ from normal advertising or marketing? It is costing existing members.”
Australian Institute of Superannuation Trustees, Eva Scheerlinck acknowledged the dilemma, noting that a member could spend her points now, but that superannuation was intended for retirement.
However, she noted that other funds had similar, if somewhat different offers, including providing health-related benefits such as boost juice vouchers and subsidised gym memberships.
Scheerlinck said it could therefore be argued that the benefits were helping drive down the fund’s group insurance premiums.
Zanker said that the question had to be asked about “at what point does it cross the line, and if it is deemed to cross the line where does it actually stop”.
“By this one starting now, others will think of creative ways.” he said.
Facer said that if the practice was allowed to continue, then the industry might be seen as effectively sanctioning it, albeit that it could be argued that such an offer created membership growth and therefore helped drive down overall costs.
