The sole purpose test and the manner in which it would impact the advertising activities of superannuation funds in the lead up to the new choice regime emerged to dominate the Conference of Major Superannuation Funds (CMSF) held in Hobart last month.
Despite reassurances from the Assistant Treasurer, Mal Brough and efforts at clarification from the executive chair of Industry Fund Services, Garry Weaven, many delegates at the conference indicated they were concerned at the implications of a letter issued by the Australian Prudential Regulation Authority (APRA) relating to the sole purpose test.
In fact, it took a strong statement by an APRA official to a key session of the conference to allay member concerns.
That official, APRA’s general manager, Specialised Institutions Divisions, Stephen Glenfield said he believed there had been an over-reaction to the regulator’s letter.
Glenfield said that while advertising that was solely directed towards recruiting members in the new choice environment might be deemed to breach the sole purpose test, this would not necessarily be the case when the advertising fulfilled other, associated purposes.
“Existing members of superannuation funds must get something for it to be justifiable under the sole purpose test,” he said. “And what we’d ask trustees to do is demonstrate what benefits existing members receive from such advertising.”
Glenfield said he would have expected trustees would have made an appropriate business case for approving such advertising.
Glenfield’s comments came only a day after Brough told the conference that industry funds were not being discriminated against by the APRA approach.
Brough used his opening address to the conference to claim that a letter written to superannuation funds by APRA warning them about the possibility of membership-related advertising breaching the sole purpose test had not been directed solely toward industry funds.
“It is not my understanding that the letter was directed solely against industry funds,” he said. “The same rule applies to everyone with respect to touting for new members,” Mr Brough said.
However, Weaven used the first plenary session of the conference to question APRA’s approach and the interpretation which was being applied to the sole purpose test.
Mr Weaven said that it needed to be remembered that superannuation funds understood the economies of scale and the need for funds to act in the best interests of members in pursuing economies of scale.
“It would be irresponsible not to seek to grow when member’s interests are at stake,” he said.
While backing the right of the APRA to issue its warning letter to superannuation funds, Mr Brough suggested that any funds who had issues with the regulator’s approach should raise those issues with APRA.
