It was a year of changes for superannuation after Parliament passed a series of reforms in June.
Here were some of the biggest.
Since November, new super fund members have been stapled to the first fund they joined while those already in the workforce have been stapled to their current super fund.
The government introduced the measure to stop people unintentionally setting up new superannuation accounts every time they started a new job.
People with multiple superannuation accounts end up paying unnecessary fees that can erode their retirement balances by as much as $50,000, according to Super Consumers Australia.
Treasurer Josh Frydenberg said that multiple account fees were costing members $450 million a year – money that could have gone towards building their retirement savings.
Underperforming super funds
Under changes brought in by the federal government’s Your Future, Your Super legislation, financial regulator APRA tested the performance of super funds against industry benchmarks and posted the results on a new comparison tool run by the ATO.
To begin with, APRA only looked at the performance of default super funds to which employers sign up workers if they make no other choice.
As a result, the regulator named and shamed 13 funds that failed to meet benchmarks for returns – with about 1.1 million Australians found to have invested a combined $56.2 billion in these underperforming funds.
APRA sent letters to these Australians informing them of their fund’s underperformance, with separate data from Industry Super Australia finding that failing to switch to a better fund could cost these members up to $229,000 by retirement.
This is because the government’s new stapling measures mean that people will be stuck in these dud funds for life unless they make an active choice to switch.
But the legislation also stipulated that if a fund underperforms for two consecutive years, it will be barred from accepting new members until it improves its performance.
From July 2022, choice funds that are ‘trustee directed’ will also be included in the performance testing.
But platform-style funds where members build tailor-made investment portfolios will be left out altogether.
Best Financial Interests Duty
Parliament introduced a new Best Financial Interests Duty to ensure all super fund expenditure is in the interests of members.
The new duty drew heavy criticism, with funds warning it ran counter to a key recommendation of the Hayne royal commission and would lead to higher costs for members, as funds would have to carry out additional compliance “without any corresponding benefit”.
But the measure was far less controversial than an abandoned veto power that would have given the Treasurer of the day the power to block any investment by a super fund – regardless of whether it was in members’ best interests.
Before the new duty was introduced, super funds were already legally obliged to act in their members’ best interests.
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