The Budget seeks to address various shortcomings in the superannuation system
Unintended multiple accounts
One of the consequences of changing employers is the creation of multiple accounts. These result in unnecessary fees, and reduce retirement savings. Under the Budget, the proposal is that individual’s super is ‘stapled’ to them. Stapling means that the individual keeps their super fund when they change jobs. The employer will pay super to the attached fund, and only change if the individual selects to.
Paying too much
Super fees are being paid on unused accounts, causing an erosion of retirement savings. ‘YourSuper’ allows comparison between fees and payments across different super funds so that individuals are able to make informed decisions about their super.
Not all super funds perform equally. This can lead to an inequitable retirement result for individuals.MySuper products will now undergo an annual performance test to level the playing field. Funds will be required to notify their members if they are deemed to be underperforming and if they fail the test twice consecutively, they will not be able to accept new members until their performance improves. This will give members more information and the opportunity to choose what they can do if their fund is underperforming.
Lack of accountability and transparency
Currently, members are not informed about how their money is being invested, and whether it is being invested appropriately. Through this initiative, super trustees will be required to provide members with key information regarding how they manage and spend their money ahead of Annual Members’ Meetings. They are also required to comply with a new duty to act and must demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests. This increase in transparency and accountability will allow members to make decisions regarding their super before it’s too late.