New superannuation laws are expected to eliminate underperforming, fee gouging super funds with the introduction of automatic consolidation of inactive accounts and a fee cap for accounts with balances under $6000.
Two superannuation bills were passed in the Senate last week and have sparked a reaction from Industry Super Australia and the Institute of Public Accountants.
Industry Super Australia deputy chief executive, Matt Linden said that despite two bills being passed, it was disappointing to hear that “explicit changes intended to protect young and low balance members from unnecessary insurance were completely dropped from the final bill.”
“While additional safeguards were definitely required, removing the provisions completely was not necessary,” he said.
“Regardless, Industry super funds will strive to ensure default insurance arrangements remain cost effective and matched to the insurance needs of members taking into account age and other factors such as occupational risk.”
Mr Linden said that one of the most important changes from July 1 this year was the automatic consolidation of inactive accounts under $6000.
“Although the technology to automatically consolidate accounts has been available for many years without requiring members to do the legwork legislators have dragged the chain,” he said.
“Coupled with fee caps for accounts under $6000 these measures will have to do the heavy lifting to prevent erosion of small account balances.”
Institute of Public Accountants chief executive officer, Andrew Conway, said the Coalition’s Protecting Your Super package had been stalled for too long in the Senate.
“Fee-gouging, particularly by the large superannuation entities, has to be dramatically wound back if we are to encourage a culture of superannuation contributions and savings as part of retirement planning,” he said.
“The Bills that form this package were announced in last year’s Federal Budget in May … and starts to address some of the flaws in our superannuation system.
“The package also stops default charging of life insurance with an opt-in option for people under 25 while the current default process erodes super balances with unnecessary insurance.”
He said too many Australians still had multiple superannuation accounts.
“It is encouraging to see the work by the ATO to educate the public over lost and unclaimed superannuation with promising results of $860 million found and consolidated just in the last quarter of 2018. The worry is that there is $17.5 billion reportedly, still in the lost and unclaimed category,” Mr Conway said.
“Australia must encourage people to build their superannuation retirement funds to alleviate the pressures that will exist on government paid pensions in the future.”