Need to know
- The 2020 federal budget included new measures aimed at reducing duplicate super accounts, making it easier for people to compare super funds, and targeting underperforming funds
- Super Consumers Australia director Xavier O'Halloran says the changes are a good start
From next year, your super will 'follow you'
One of the major problems in the Australian super system is the sheer number of duplicate accounts. These are mostly unwanted and eat into super fund members' retirement savings through fees and insurance premiums.
The Productivity Commission found that unintentionally holding multiple super accounts can cost a person $51,000 from their retirement savings.
From 1 July 2021, a new super account will no longer be created automatically when you start a new job. Instead, your existing account will be 'stapled' to you and follow you from job to job. Your new employer will pay your super into your existing fund, unless you nominate another fund.
Super Consumers Australia director Xavier O'Halloran says the change is a positive step towards reducing the waste of multiple super accounts.
"Superannuation account stapling means no more duplicate fees and duplicate insurance, creating a huge saving for people over their lifetimes," he said.
A new 'YourSuper' table will rank funds
The 'stapling' reform, on its own, won't stop people being defaulted into a dud fund when they first join the workforce. This is where the YourSuper comparison tool comes in.
This online tool, which will be available from 1 July 2021, will give a list of MySuper products ranked by fees and investment returns.
The goal is to boost competition by making it easier for people to compare and switch funds. If you can move out of a struggling fund more smoothly, the thinking goes, funds will have to compete harder for the right to manage your money.
The tool will link to super fund websites, so users can easily choose a MySuper product. It'll also show your current super accounts and, if you have more than one, suggest consolidating them into a single account.
The goal is to boost competition by making it easier for people to compare and switch funds
Super Consumer Australia director Xavier O'Halloran says that a tool allowing people to easily compare super funds could help fund members.
"The government has rightly recognised that, for stapling to work, the system needs to support people to find good performing funds for their retirement savings," he said.
"We look forward to working with the government as it develops the proposed YourSuper comparison tool to inform consumer decision making."
Super Consumers Australia senior policy advisor Rebecca Curran says a comparison tool addresses a real need.
"At the moment, there is a lack of a consumer-friendly comparison tool allowing people to compare super funds," she said.
"People need clear, simple information that equips them to make better decisions about their super."
Dud super funds will get 'two strikes'
Fund underperformance has long been one of the most pressing problems in the Australian super system.
The Productivity Commission calculated that ending up in an underperforming MySuper product can cost a person more than $500,000 over their working life.
A new yearly performance test will aim to target this problem. By 1 July 2021, all MySuper products will have to pass this test. If a fund fails, it will have to let its members know it's underperforming and refer them to the YourSuper comparison tool by October 2021.
If a fund fails, it will have to let its members know it's underperforming and refer them to the YourSuper comparison tool by October 2021
If a fund is identified as an underperformer two years in a row, it'll be banned from accepting new members until it improves.
These changes will also apply to 'choice' super products (i.e. those you can't be defaulted into) from 1 July 2022.
The government projects that these stricter rules for underperforming funds will add more than $10 billion over 10 years to the retirement savings of Australians.
O'Halloran supports this crackdown on underperformers: "Requiring products that fail the test to inform their members and preventing persistently underperforming products from taking on new members is a good start," he says.
"However, measures are also needed to ensure that existing members aren't disadvantaged by underperformers.
"We look forward to working closely with the government and regulators to design a system that means existing members within underperforming funds can smoothly transition to a better deal."
This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.