New super laws coming into effect on 1 July 2019 to safeguard your super from account erosion due to duplicate fees and insurance policies should protect your retirement savings.
The legislation followed a Productivity Commission finding that: “Not all members get value out of insurance in super. Many see their retirement balances eroded – often by over $50,000 – by duplicate or unsuitable (even ‘zombie’) policies.”
The Australian Securities and Investments Commission (ASIC) has called on super funds to help their members better understand the Protecting Your Super Package (PYSP) of reforms, due to take effect on 1 July.
The reforms include:
- Insurance will be opt-in for members whose accounts have been inactive for 16 months.
- Fund members with balances under $6000 and whose accounts have been inactive for 16 months will have their accounts paid to the Australian Tax Office (ATO). The ATO will take proactive steps to consolidate this with the members’ active super fund.
- Caps will be imposed on certain fees for account balances under $6000.
- Exit fees will not be charged when moving money from a superannuation account.
ASIC commissioner Danielle Press says loss of super savings due to unnecessary fees and premiums is a significant issue for many Australians.
“Most consumers are not aware of the fees and insurance premiums charged to their superannuation accounts or the steps they can take to avoid unnecessary reduction in their super balance,” she said.
“The PYSP changes will encourage the consolidation of multiple low-balance superannuation accounts and help ensure members have insurance arrangements that are suitable for them without unnecessarily eroding their super balance.”
ASIC has called on funds to provide balanced and factual, not misleading, information to members – and soon.
“ASIC expects superannuation trustees to implement the changes in a timely manner and communicate responsibly. Their communications need to help their members,” said Ms Press.
“It is not appropriate for trustees to encourage all members to maintain insurance. Many members with inactive accounts will be better off allowing the insurance to lapse. Similarly, trustees should not be urging all members with low-balance accounts to keep their account within the fund as this may not be in the best interests of members.”
Xavier O’Halloran, head of advocacy and campaigns at the newly formed Superannuation Consumers’ Centre at CHOICE, believes some super funds are breaking the law by “hitting people with duplicate zombie fees and insurance”.
“This is a disgraceful act of self-interest,” he says.
“We call on all super funds to heed ASIC’s warning. Misleading people about their insurance needs and the value of consolidating their accounts is not on. The Superannuation Consumers’ Centre will be paying close attention to how funds tell their members about changes to the law and report those that fall short.
“PYSP was introduced to protect people’s retirement savings from erosion due to ‘zombie’ fees and insurance. For some funds to try to keep the fee gouge running by misleading people into acting against their own interests is not only galling, but it’s against the law.”
ASIC is working closely with the Australian Prudential Regulation Authority (APRA) and the ATO to ensure the changes are correctly implemented and says it may take action if trustees continue to provide misleading communications.
“How a trustee communicates with their members about the PYSP changes will give us an indication of the trustee’s commitment to members’ best interests,” said Ms Press.
Are you confident your fund is looking after you?