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In a statement released this morning, ASIC raised concerns about statements made in promotional material about fees paid in connection with ING Direct's Living Super product.
ASIC was concerned that ING Bank (the promoter and investment manager of the fund) promoted Living Super, between March 2015 and September 2016, as having 'No Fees' for the 'Cash Investment Option', 'No Investment and Administration fees' for the balanced option.
The regulator also said Living Super was marketed as having low fees options without making it clear that customers were paid a lower interest rate on the cash portion invested with ING Bank than the rate paid by ING Bank to its Saving Maximiser customers for the relevant investment options.
"Some of the promotions also did not indicate the 'no fees or low fees' features may not continue should ING Bank no longer be the investment manager," said ASIC.
"ING Bank has acknowledged that its communication could have been clearer and is writing to all members of Living Super to inform them that the interest rates paid on Living Super may be different to the rates paid to direct banking customers and further, that the fees for Living Super may change should ING Bank no longer be the investment manager," said ASIC.
"ING Bank have advised ASIC they will also write to affected members informing them of the compensation paid and will not retain any of the financial benefit from the lower interest rate that was applied."
As a result, ING Direct will no longer be promoting Living Super as having no fees or no investment and administration fee, said ASIC.
"ASIC also expressed disappointment that ING Bank was promoting Living Super using product inducements to clients separate from the superannuation product such as cash payments," said the regulator.
"ASIC observes that promotions of this type are a bad practice that may encourage decisions to be made on the basis of short term considerations that may not reflect the needs of a member. ING Bank has advised ASIC that it will stop offering separate product inducements in relation to Living Super."
ASIC commissioner Greg Tanzer said: "This action reflects ASIC's ongoing focus on the disclosure of fees and costs in superannuation."
"Consumers need to be able to make informed decisions about their superannuation and managed investments, based on accurate and consistent fees and costs disclosure," Mr Tanzer said.
"Promotion of superannuation products based on low or no fees can be very influential on consumers. This makes it very important to ensure any such promotion is not potentially misleading by reducing the benefits consumers receive in exchange for the no fees or low fees features," said Mr Tanzer.
In a statement, ING Direct admitted it could have been "clearer in communication" and said the $5.38 million will be credited to customer accounts by September 30.
"ING Direct is writing to all Living Super customers to explain the action and let customers know how much they will receive," said the statement.