The government lulled everyone into a false sense of security before the Budget, promising it would only tinker with superannuation in its major financial recovery plan.
However, there were some major announcements. Here’s how they will affect you.
The government announced that your superannuation fund will follow you around when you change jobs or careers.
While it will still be possible to change funds whenever you want, if you pay no attention to your super fund, it will stop the creation of multiple accounts, which often leads to people losing money in retirement.
Some of the detail around how this proposal will work still has to be ironed out and there are major concerns about what would happen to insurance policies if people switched to different industries.
The plan means that by 1 July 2021 if an employee does not nominate an account at the time they start a new job, employers will pay their superannuation contributions to their existing fund.
It will also allow employers to obtain information about the employee’s existing superannuation fund from the Australian Taxation Office (ATO).
The employer will do this by logging on to ATO online services and entering the employee’s details. Once an account has been selected, the employer will pay superannuation contributions into the employee’s account.
If an employee does not have an existing superannuation account and does not make a decision regarding a fund, the employer will pay the employee’s superannuation into their nominated default superannuation fund.
The government estimates that there are six million multiple accounts held by 4.4 million people and that these multiple accounts mean that $450 million in unnecessary fees are drained from these super accounts.
It is believed that the implementation of this measure will result in 2.1 million fewer unintended multiple accounts over 10 years and save workers $2.8 billion in duplicate fees, insurance and lost earnings.
YourSuper comparison tool
The government also committed to a new, interactive YourSuper comparison tool.
Once this measure was announced, it was immediately attacked by Labor, which announced plans to block it in the belief that it had a “massive design fault” built into it.
That is because the new tool only measures investment fees and does not measure administration fees, rendering it somewhat useless.
The government said that by 1 July 2021, the YourSuper tool will provide a table of simple super products (MySuper) ranked by fees and investment returns and link workers to super fund websites where they can choose a MySuper product.
The tool will also show your current super accounts and prompt you to consider consolidating accounts if you have more than one.
Annual performance test
By 1 July 2021, MySuper products will be subject to an annual performance test.
If a fund is deemed to be underperforming, it will need to inform its members of its underperformance by 1 October 2021.
When funds inform their members about their underperformance, they will also be required to provide them with information about the YourSuper comparison tool.
Underperforming funds will be listed as underperforming on the YourSuper comparison tool until their performance improves.
Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members. These funds will not be able to reopen to new members unless their performance improves.
By 1 July 2022, annual performance tests will be extended to other superannuation products.
What do you think of the government’s proposed superannuation changes? Should any measurement tool take all fees and charges into consideration?
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