Superannuation reforms announced in the federal budget will staple one super account to every employee, preventing their balances from being diminished by multiple accounts and unnecessary super fees in the long run.
The federal government said its Your Future, Your Super package, which commences on 1 July 2021, would stop unintended multiple superannuation accounts being created by ensuring Australians kept their fund when they changed employers.
“Too many Australians are paying too much in superannuation fees,” Treasurer Josh Frydenberg said in his budget address.
“At $30 billion a year, the superannuation fees Australians pay exceeds the cost of household gas and electricity bills combined. Australians today are paying $450 million a year in unnecessary fees as a result of 6 million multiple accounts.
“Tonight, I announce that new super accounts will no longer be automatically created every time a worker changes jobs. Under our reforms, your super will follow you.”
The package would also implement an online YourSuper comparison tool, providing consumers with greater choice and encouraging competition between funds, Frydenberg noted.
In addition, he said the reforms would ensure funds were held to account for underperformance, as well as increase transparency.
“Superannuation funds will be required to meet an annual performance test under the guidance of the prudential regulator,” he added.
“Poor-performing funds will have nowhere to hide and will be required to notify their members of their underperformance.”
The Financial Services Council (FSC) applauded the government for delivering a budget that put superannuation consumers first, alongside job creation and taxpayers.
FSC chief executive Sally Loane said: “The Your Super package will permanently address the scourge of account duplication and fund underperformance. The Productivity Commission concluded that account duplication alone was costing consumers $2.6 billion every year.
“The FSC congratulates the government for committing to the Royal Commission’s ‘default once’ recommendation, which will prevent unnecessary account erosion from fees and the creation of new duplicate accounts.”
SMSF Association deputy chief executive Peter Burgess welcomed the package as a positive step for the superannuation sector and said time would tell what impact it would have on SMSFs.
“There’s obviously more detail to come as to how these particular measures are going to work. We’ll just have to wait and see, once we’ve seen the detail, as to whether it will have any implications for SMSFs,” Burgess told selfmanagedsuper.
“We believe having a more robust superannuation sector will benefit all participants, whether they choose to have an SMSF at some stage in their life or not.”
CPA Australia said the budget was likely to be the first of a series of federal budgets focused on repairing the economic impact of the COVID-19 pandemic.
CPA Australia external affairs general manager Jane Rennie said: “The announcement to ensure portability of superannuation accounts is a good step towards reducing the unnecessary cost of lost superannuation for individuals.
“It is disappointing that the budget did not include support for Australians to rebuild their superannuation savings after so many accessed their superannuation accounts to survive financially as a result of COVID-19.”