The government’s three major changes in the super system, which come into effect after July, are the biggest since compulsory superannuation was introduced in 1992.
What do they mean for working Australians?
One of the major changes which will come into effect from November 1, will free workers from having to change their fund every time they move jobs.
Instead of creating multiple super accounts and paying varying administration fees for each fund, the worker’s chosen fund will be “stapled” to their career path and follow them from job to job.
In other words, they will keep the same fund when they move jobs, unless they choose to change their fund. This is good because multiple funds usually mean multiple administration fees which will only erode the potential super savings for many workers.
As Superannuation Minister Jane Hume said: “The reforms will correct one of the original sins of the superannuation system – the proliferation of unintended multiple accounts. The design flaw has ripped off members with multiple set of fees and insurance premiums and was clearly ignored for many years to benefit funds at the expense of members.
“Importantly, it stops employers cutting backroom deals with unions to create new accounts in their default for employees who already have one.”
To make sure that the ”stapled” fund is performing well, from July 1, workers will be able to compare the performance of super funds on the new interactive online YourSuper tool.
The tool will list MySuper funds, ranked by fees and investment returns and show the member’s current super accounts for easy comparison.
The third change is that the government will require superannuation funds to meet an annual performance test. Funds which fail the test will be required to tell their members by October 1 if they fail the test.
This will mean that employees will be told if their retirement nest egg is in a “dud” fund that has consistently underperformed in the last six years. If so, they has better switch funds – fast.
Underperforming products which persistently fail the test, will be prevented from taking on new members.
The government has estimated that the three reforms which represent the biggest shake-up of the super system, will save Australians $17.9 billion over 10 years. The new changes will also stimulate competition across the industry which can only be good for members.