The Federal Government announced a range of measures in its 2020 Budget aimed at getting the economy back up to speed.

Along with a range of stimulus measures, the Treasurer also announced a number of measures around superannuation, bundled up as the ‘Your Future, Your Super’ reforms. We’ve highlighted the proposed changes we think are most relevant to our members, and explained what they might mean for you.

Your Future, Your Super

Reducing multiple accounts

The proposed measure:

Currently, a new super account is automatically opened for you in your employer’s default fund, unless you nominate another fund. With the proposed change, your employer will instead be obligated to pay your super into your existing account if you have one, unless you tell them otherwise.

Proposed effective date:

1 July 2021

What it means:

This measure aims to reduce the number of Australians with multiple super accounts.

According to the Government, there are currently 6 million multiple accounts held by 4.4 million people. As members pay fees for each account they hold, the Government estimates that these multiple accounts are costing $450 million in unnecessary fees each year.

How it will work:

If an employee doesn’t nominate a super account when they start a new job, their employer will be able to find details of their existing account via the ATO, and direct their super contributions to this account.

If the employee doesn’t have an existing account and doesn’t nominate a fund, their contributions will be paid into a new account opened in the employer’s nominated default super fund.

Easy comparison of MySuper products

The proposed measure:

The Government will create an online tool called ‘YourSuper’, allowing Australians to easily compare MySuper products.

Proposed effective date:

1 July 2021

What it means:

Australians will be able to easily compare MySuper products through a new YourSuper comparison tool. A MySuper product is a type of account you can have in a super fund. They typically offer lower fees and either a ‘single diversified’ or a ‘lifecycle’ investment option. For example, Glidepath is Qantas Super’s MySuper product.

The Government believes this comparison tool will spur more competition and make super funds work harder to manage Australians’ money.

How it will work:

MySuper products will be ranked by fees and investment returns, with each product linked to the fund’s website. The tool will also show the user their own current super accounts, and prompt them to consider consolidating their accounts if they have more than one.

Fund benchmarking and penalising underperformance

The proposed measure:

Super funds will be subjected to an annual benchmarking performance test by the Australian Prudential Regulation Authority (APRA). The test will assess a fund’s investment performance, with the results of the tests made public.

Proposed effective date:

1 July 2021 – for MySuper products

1 July 2022 – for non-MySuper accumulation products

What it means:

Australians will have more information available to them about fund performance, allowing them to make more informed choices about their super fund.

According to the Government, a typical Australian spending their working life in the worst performing MySuper product would be up to $98,000 worse off at retirement.

How it will work:

Underperforming funds will be listed as underperforming on the YourSuper comparison tool until their performance improves.

Funds that have underperformed over two consecutive annual tests will be required to inform their members about their underperformance, and provide them with information about the YourSuper comparison tool.

These funds will not be permitted to accept new members until their performance improves.

Greater transparency from funds

The proposed measure:

Super funds will be required to comply with a new duty that ensures their spending is motivated solely by the best financial interest of members. Funds will be required to disclose how they’re spending members’ money.

Proposed effective date:

1 July 2021

What it means:

Australians will have more information about how their super fund operates.

The Government expects that this measure will reduce waste in the super system through more transparency and ensuring funds are accountable to their members.

How it will work:

Key information around spending will need to be provided to members ahead of Annual Members’ Meetings.

Beyond the Budget

Though debate about the planned rise of the Superannuation Guarantee rate has been swirling for several months, there was no news about the rise in the Budget.

The Superannuation Guarantee – the amount that an employer must contribute to an employee’s super – is currently set at 9.5 per cent of the employee’s wage. It is legislated to rise to 10 per cent on 1 July 2021, with a further increase of 0.5 per cent each financial year to 12 per cent by 1 July 2025.

The series of increases was originally planned to start on 1 July 2015, but was delayed until 2021 by the Abbott Government in 2014.

With the first increase now less than a year away, a number of Coalition MPs have been calling for the rise to be scrapped in the wake of the COVID-19 pandemic, believing that it could come at the expense of wage growth.

However, the Association of Superannuation Funds of Australia (ASFA) argued in a pre-Budget submission that the effects of COVID-19 have in fact heightened the need for the increase.

More than 500,000 Australians are estimated to have completely emptied their super account through the early release scheme, while millions have also missed out on months of contributions due to unemployment or stand down.

“The COVID-19 related reductions in employment have disproportionately impacted on the young and those on lower incomes,” ASFA stated.

“While the young may have a substantial period of years before retirement to make up for lost contributions they also miss out on the benefits of the compounding of investment returns over many years.”

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