Choice of Fund

Written on the 14th of December 2009 by Continuum Financial Planners Pty Ltd

What is Choice of Super(annutaion)/Fund?

Choice of superannuation fund is a law that was introduced to give a significant number of employees the right to choose which superannuation fund will receive their employer superannuation contributions. It has applied since 1 July 2005.

Who Does Choice of Superannuation Affect?

Employers, employees, superannuation funds and their trustees, and financial advisers all have obligations under choice of superannuation fund. The Tax Office, ASIC and APRA will jointly ensure that people comply with their obligations.

Employers

Generally, since 1 July 2005, employers have been obligated to offer choice of superannuation fund to all eligible employees. To meet this obligation, employers need to identify their eligible employees; provide a Standard choice form to their eligible employees; and act on an employee’s choice.

Employers also need to choose an employer fund (default fund) to which they will make superannuation guarantee contributions if an employee does not make a choice.

Employees

Generally, since 1 July 2005, employees can choose the fund to receive their future superannuation contributions unless:

• their superannuation contributions are made under a certified agreement or an Australian workplace agreement
• their superannuation contributions are made under a state award or industrial agreement, or
• their employer is a sponsor of a particular defined benefit fund and certain conditions are met

There will also be public servants and individuals working for government agencies who may not need to be offered choice of superannuation fund.

If an employee is engaged under a federal award, they must be offered choice of superannuation fund whether or not that award requires contributions to be made to a specific superannuation fund.

Some state laws also provide for choice of superannuation fund under state based arrangements.

Employees who aren’t sure what award or industrial agreement (if any) they are covered by can find out by:

• asking their employer
• visiting the Workplace Authority website (for federal awards and agreements and links to information on state awards and state industrial agreements), or
• ‘phoning the government agency responsible for workplace relations (in Queensland the agency responsible is Wageline.)

If an eligible employee wishes to choose a superannuation fund, they should provide their employer with all the required information. The employer does not have to make superannuation contributions to the employee’s chosen fund until all information is provided.

Superannuation Funds Trustees

Superannuation funds can inform employees whether their employer is able to make contributions to the fund on their behalf. If so, funds should provide employees with the information they need to complete the Standard choice form.

Superannuation funds and trustees must also comply with all relevant licensing and disclosure requirements. They must not illegally provide kickbacks to employers for choosing their fund as the employer fund, or engage in misleading or deceptive conduct.

How can Continuum Financial Planners help?

If you have more than one superannuation fund account, or if you are considering changing your employment situation (or if you have recently done so and are confused about your options), you should contact us for an opportunity to discuss your options – and to learn how your superannuation should be managed as part of a broader wealth accumulation strategy. Your first meeting with one of our experienced financial advisers will be at our cost.

Acknowledgement: we appreciate the contribution of the substantial portion of this article as was extracted from the Deutsche Asset Management’s sponsored Desk Caddie.