Under an overhaul of superannuation, new super accounts won't be automatically created when workers get a new job - spelling the end of fee gouging.
Last night, the Morrison Government announced a raft of new measures in the Budget aimed at improving the superannuation system.
The Your Future, Your Super package that will save Australian workers an estimated $17.9 billion beginning July 1 2021 includes:
- New super accounts will no longer be automatically created every time a worker starts a new job. Instead, your superannuation account will 'follow you' when you change jobs, preventing multiple super accounts from being created, ending fee gouging;
- Superannuation funds will be required to meet an annual performance test;
- Poor performing funds will be required to notify their members of their underperformance; and
- The Government will establish an online comparison tool known as 'YourSuper' providing information about superannuation fees and returns
Treasurer Josh Frydenberg said the changes will prevent Australians from paying too much in super fees.
"At $30 billion a year, the superannuation fees Australians pay exceeds the cost of household gas and electricity bills combined," Frydenberg said.
"Australians today are paying $450 million a year in unnecessary fees as a result of 6 million multiple accounts.
"Over the next decade, the reforms announced tonight will reduce waste in the system and save Australian workers $17.9 billion – ensuring your super works better for you."
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Changes will leave Australians with more in retirement
The changes to superannuation have been widely welcomed by industry experts.
Director of consumer advocacy group Super Consumers Australia Xavier O’Halloran said the changes will leave Australians better off in retirement.
"As the Treasurer noted in his speech tonight, Australians are paying far too much in fees across multiple accounts. These reforms clean up zombie accounts that have eaten away people’s retirement savings for too long," O'Halloran said.
“The ‘Your Future, Your Super’ reforms are a good start to ensuring that all Australians get a fair deal from our superannuation system. We look forward to working with the government to implement these reforms and to further tackle high fees and unfair conditions that consumers face when building their retirement savings.”
O'Halloran said the Federal Government's proposal to 'staple' superannuation accounts means that Australians won't waste money in fees by having multiple super funds.
“Superannuation account stapling means no more duplicate fees and duplicate insurance, creating a huge saving for people over their lifetimes.
“The government has rightly recognised that for stapling to work the system needs to support people to find good performing funds for their retirement savings. We look forward to working with the government as it develops the proposed YourSuper comparison tool to inform consumer decision making.”
The Association of Superannuation Funds of Australia (ASFA) said that while they support the measures to lift standards for superannuation funds by performing annual performance tests, the devil is in the detail.
“We don’t suffer from a shortage of good funds and we need to ensure that these measures don’t reduce competitive intensity or damage the nation building role of superannuation,” said ASFA CEO Dr Martin Fahy.
“In the absence of the release of the Retirement Income Review and the lack of specificity in the Budget papers, it is unclear how the changes will work in practice or what the implications will be for competition, efficiency and incumbents in the sector.
“We need to avoid reducing the complexity of MySuper to a singularity without any reference to the nuance of member preferences and long-term fund performance."
But the changes could also leave Australians tied to a dud fund
One argument that's been made against the changes is that by 'stapling' Australians to a fund, it could leave them tied to a dud fund for years before they're aware of it.
Industry Super Australia chief executive Bernie Dean said this could cost Aussies thousands in retirement.
“While it is pleasing the government is tackling multiple accounts, stapling workers to a single fund could leave them stuck in a dud fund for life, costing them hundreds of thousands of dollars at retirement," Mr Dean said.
Instead, ASFA says members’ money should be automatically rolled over into a new fund when they change jobs.
“Stapling the money to a member would remove multiple accounts quicker and more effectively weed out underperformers. Underperformance is the biggest cost drain on member savings and dud funds need to be removed no matter what type of fund they are."
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