Super funds warned about millions spent on sponsorships, perks

The super sector has never been richer – or under more scrutiny. Now, funds’ advertising and marketing budgets are being reviewed and some are being warned about the way they’re spending your retirement savings.

Funds were told they would be under the microscope from 1 July as a result of the Best Financial Interests Duty that was introduced as part of the federal government’s superannuation reforms.

The regulator wasted little time, telling the sector it would take action against funds spending millions of dollars on marketing, advertising, sponsorships and promotions that do not benefit members.

An Australian Prudential Regulation Authority (APRA) review found that some funds had failed to measure – or were unable to measure – “anticipated and achieved benefits” to members.

Read: What to do if your fund is underperforming

APRA reviewed 12 funds from a cross-section of the industry between November 2020 and October 2021 and analysed $87 million of marketing spending, including instances of free tickets to sporting events plus merchandise and hospitality for fund directors, executives and staff.

APRA board member Margaret Cole said Australians expected those they entrusted with growing and protecting their retirement savings to deliver value from every business plan enacted, dollar spent and investment made.

“Overwhelmingly, these reviews illustrate that robust frameworks, clear accountability and holistic approaches to business planning are essential ingredients in running what are, in most cases, multibillion-dollar businesses with enormous fiduciary responsibilities,” she said.

“We expect all trustees to review their operations in light of these findings with a view to identifying any substandard practices and improving processes and procedures.

Read: Super fund fined $20m, paying $67m back to members

“While the expenditure review was conducted prior to the introduction of the Best Financial Interests Duty, where certain expenditure has continued beyond 1 July this year, we have challenged trustees to demonstrate how it complies with the new law.

“Once their responses have been assessed, APRA will consider what, if any action, is necessary to protect the interests of superannuation members.”

APRA has not revealed which funds it examined, but sports-related spending received close attention.

The New Daily reports that in one example of suspect expenditure, a fund had entered into a multi-year arrangement to sponsor a sporting team but could not provide evidence to show the board had signed off on a business case at the start of the deal.

Other funds had renewed marketing campaigns and sponsorship arrangements without being able to demonstrate they benefitted members.

Read: Funds want to provide pension eligibility advice

Super Consumers Australia director Xavier O’Halloran says funds’ marketing spending has long been a concern.

“It’s something we have been talking about for a long time,” he said. “If it can be demonstrated that spending attracts customers and ultimately drives down costs, then that’s fine. But funds need to be demonstrating those benefits to people’s retirement savings.”

Alex Dunnin, executive director of research group Rainmaker, says APRA is finally doing what regulators are meant to do.

“They’re meant to be out there scrutinising funds and all of a sudden they’re getting very aggressive. That’s a good thing, but it has taken a while to get to this point.”

Mr Dunnin said APRA’s new stance was welcome as “long as it’s done fairly”.

Are you happy for your fund to spend millions on sponsorships and advertising? Why not share your thoughts in the comments section below?

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Written by Janelle Ward



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