Federal Budget 2018: Government moves to cap excessive super fees

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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?

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Written by Ben

7 Comments

Total Comments: 7
  1. 0
    0

    There should be no fees for low super balances at all. Our young people just can’t keep enough super in their funds with casual work to even pay the fees.

  2. Profile Photo
    0
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    Another useless ineffective policy from an inept and incompetent government. Look at all of the high costs associated with the for profit super funds.

  3. 0
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    This government it,s no good to anyone only the big bussiness peoples. So you had to thing proply before you vote.

  4. 0
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    What has this budget done for older people? Pensioners and Part Pensioners …nothing. It is a big talk fest. I am a Part pensioner who is caring for my Mother from the UK on a tourist visa for 12 months, who has mild dementia, to give my brother some respite, I cannot even access a bit of respite for her to go into whilst I go to the Dentist for myself. To keep her with me indefinitely is way beyond my financial assets. I cannot afford the cost of the Visa application or the bond to put up to look after her going forward. She is going to have to go back to the UK and live the rest of her life lonely, in a residential care home. That is the type of government we have. Keen to get you over here as a 20 year old migrant, but no help when you become a Pensioner to help look after your nearest and dearest.

  5. 0
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    You need to read the fine print on account based pensions funded through super to be introduced from 1 July 2019. The government will now withhold 25% of your own money and put it into a ‘deferred account’ for when your allocated funds run out. Another way of them getting their hands on your super nest egg!

  6. 0
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    This problem already started at John Howard time when he put in the GST the price of everything had gone up. You must know 10% of everything is a lot of monies but he don,t know how to manage it. That how he had to go.
    Today Australia it,s not easy to earn a living you only can get casual work and job are through agency. The agency will put you on standby when the boss call up the agency then only you had work. So your super will be all over and you can,t put them together because it place you go to work they had different super funds company and some accountant of the company don,t want to bank in your super to your chosen one. Because they if they do it for you other were also had to so too much work for the accountant. That why super fund very low in balance and also all over the place.


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