Retirees working part-time should be able to make contributions directly into the retirement account of their superannuation fund rather than needing a second fund in accumulation phase for this purpose, according to the Super Members Council (SMC).
The super member advocate said the “outdated” requirement for members to open a new accumulation account in these circumstances meant many retirees were paying dual fees and taxes.
As such, it called for minor changes to the Superannuation Industry (Supervision) Act to simplify the process for an estimated 100,000 Australians, particularly as many retirees are choosing to delay retirement and work longer to manage record levels of inflation.
“As more than 2.5 million Australians approach retirement in the next decade, the focus needs to be on making the system easier, simpler and allowing greater flexibility,” SMC chief executive Misha Schubert said.
“Increasingly, many Australians want to dip back into the workforce from time to time after they start their ‘capital R’ retirement. Instead of making that process easy, currently they must open a second super fund account, with the administrative hassle of transferring money across into their main retirement account, and they pay extra fees – and perhaps more tax – than they need to.
“The easy fix is to legislate for Australians to be able to make super contributions from part-time work and other sources straight into their retirement account. This simple red-tape-busting reform would make retirement easier and more flexible for tens of thousands of Australians.”
SMC cited research from one of its larger member funds showing an increasing number of Australians are choosing to work following retirement.
One-quarter of retirees opened new accounts to accept contributions and then commute those to a new retirement income account and the number of members creating new accounts increased by 45 per cent between 2022 and 2023.
As part of its call for reform, the representative body also recommended several measures to simplify retirement, including legislating the superannuation component of the financial advice reform package by year end and allowing members to more easily switch into retirement products.
Finally, it advised against mandating the use of annuities for members, arguing trustees are better positioned to create suitable investment strategies for their funds.