The Government plans to protect the erosion of low-balance superannuation accounts by capping administration and investment fees, while also making it easier to switch super funds by banning exit fees.
Under a host of superannuation changes announced during the Federal Budget on Tuesday night, the Government will also act to protect lost superannuation by transferring inactive accounts to the Australian Taxation Office (ATO).
According to the Government, there were around 9.5 million superannuation accounts with balances of less than $6000 in 2015-16. By capping administration and investment fees on these accounts to three per cent per annum, the application of hundreds of millions of dollars of fees will be prevented.
The move to ban exit fees could encourage many Australians to consolidate their accounts, something they may have been hesitant to do in the past.
Exit fees cost superannuation members around $37 million in 2015-16.
The Government is also aiming to protect inactive accounts and help the ATO to reunite people with their lost superannuation.
All inactive superannuation accounts with balances below $6000 will be transferred to the ATO to protect them from further erosion.
Based on the belief that the decumulation phase of superannuation is under-developed – a finding of the Murray Financial Services Inquiry (FSI) – the Federal Government is establishing a framework for retirement income.
This involves offering greater choice of retirement income products to allow people to better manage income taking into account their likely longevity.
The proposals includes a change to requirements for super fund trustees to develop a strategy to help members achieve their retirement income objectives. This includes the need for trustees to offer Comprehensive Income Products for Retirement (CIPRs) in addition to annuities, which will ensure a retirement income stream for life, regardless of how long an individual lives.
The CIPRs will not be compulsory.
This policy proposal will be developed by the release of a position paper, calling for consultation on the detail of the CIPRs.
Simpler product disclosure rules will also be required for all retirement income products. And lifetime income streams, from 1 July 2019, will be Age Pension means-tested.
People who have already bought such products (or who buy before 1 July 2019) will have their income streams grandfathered so they will not be subject to the new rules.
Do you welcome the new super rules? What is your view of exit fees?