One of the most significant changes to the superannuation system in nearly 30 years occurred on Monday, but most Australians remain unaware of it or the fact that it could end up costing them up to $300,000.
As of 1 November, when an employee has an existing superannuation account, that account will now be ‘stapled’ with them and follow them when they change jobs.
The change means that employers will now pay super contributions into their new employee’s existing superannuation account unless the employee nominates a different account.
However, a survey revealed that only 20 per cent of people were aware of the changes to the superannuation legislation.
The UMR survey of 1120 people also found that a further 42 per cent had a vague understanding that super was changing but did not know what the reforms were and 70 per cent did not know what the term ‘stapling’ meant in relation to superannuation.
The Australian Institute of Superannuation Trustees (AIST) said the legislative changes were a good outcome for Australians who were already in high-performing funds, but that members of persistently underperforming funds could be significantly worse off.
AIST chief executive Eva Scheerlinck said that analysis of APRA performance data and the ASIC calculator showed that being stapled to a persistently underperforming fund over a working life, instead of a high-performing fund, could result in an average wage earner retiring with $309,000 less at retirement.
“While the new stapling rules don’t stop anyone from changing their super fund at any time, the reality is that millions of Australians ‘set and forget’ their super, especially if they are years away from retirement,” Ms Scheerlinck said.
“We are very concerned that the new stapling rules will negatively impact disengaged or vulnerable Australians who may not realise they are in a persistently underperforming fund and remain stapled to that fund for life. This isn’t a handful of people – it could be several million workers.
“We don’t want them to get the fright of their lives when they retire and find their balance is much lower than it could have been.”
Industry Super Australia also conducted some analysis on what being stapled to an underperforming fund could cost employees, arriving at a figure of as much as $230,000.
Industry Super has urged all Australians to check their super and make sure that they are in a good fund with solid long-term performance and low fees.
Industry Super chief executive Bernie Dean explained that as part of the changes that started on Monday more than one million Australians would be stapled to a super fund that had failed its performance test.
“Most people don’t know that government changes to super laws will see them stuck to their current fund, which could leave many stapled to a dud that hasn’t passed the government’s own performance test,” Mr Dean said.
“Being stuck to a dud fund could punch a huge hole in a person’s nest egg, and that is going to limit how much they enjoy life in retirement – people should make sure they are with a good fund.
“Given the risks to so many people’s livelihoods, the government needs to tighten up protections to make sure people are only stapled to the best funds that have passed the performance tests.”
The UMR survey also found that 70 per cent of Australians said the government should only allow workers to be stapled to funds that have passed the performance test.
Superannuation minister Jane Hume said that the changes would end the creation of unintended multiple accounts every time a person changed jobs and would help limit fees.
“Treasury has estimated that stopping the creation of millions of unintended multiple accounts over the next decade will boost balances in super by about $2.8 billion by avoiding duplicate fees and lost returns,” Ms Hume explained.
Were you aware of the super changes that came into effect on Monday? Have you checked that you are with a high-performing superannuation fund? Why not share your thoughts in the comments section below?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.