Superannuation system that we have now, has gone under quite a few reviews since 2013. The reviews were commissioned by the Coalition Government to ensure that the system is working for the Australians. Upon a 2014 Financial System Inquiry (FSI), it was observed that super industry needed to improve its efficiency, competitiveness and governance arrangements based on the increasing fees they were charging.
As a result of the review, Productivity Commission appointed by the government was asked to undertake a detailed investigation which lasted for about 3 years and its results were made public in 2019. The commission found that super system was only benefitting a few and the systemic flaws were facilitating the opening of multiple accounts that people did not need, resulting in unnecessary fees.
“These unintended multiple accounts erode members’ balances via multiple sets of fees and insurance premiums, and often end up as lost, and then unclaimed, accounts.” stated The Productivity Commission. According to the latest ATO data-
- Around 6 million multiple accounts were held by 4.4 million people and
- Over one third of the multiple accounts were held by people aged 35 or younger
And as a result, these multiple accounts charged $450 million in fees a year to the account holders. Understanding the flaws, the government has implemented a new Policy- “Your Future, Your Super” following four key elements:
- The Government will make sure that a new superannuation account is not automatically created every time you start a new job. Instead, your super will follow you, so that your new employer will pay your superannuation contributions into your existing account. This will avoid duplicate fees and insurance premiums on multiple unintended accounts.
- Your Super comparison tool will make the performance of MySuper products clear, requiring funds to compete for your savings. It will be making it easier for you to choose a well-performing product that meets your needs.
- Annual performance test – It is protecting you from poor outcomes and encouraging funds to lower costs and fees to boost Australians’ retirement incomes. Persistently underperforming products will be prevented from taking on new members.
- Superannuation funds should be held to the highest standards of accountability and transparency in how they spend their retirement savings.
The “Your Future, Your Super” policy can help the members choose well-performing products based on their needs. Members will also benefit from having an account that follows them if they change jobs. They will also be told when their product is underperforming and prevent them from joining persistently underperforming products. Ultimately, this policy will mean that your super will work harder for you, helping you save more for your retirement.