Under the new ‘Your Future, Your Super’ measures proposed under the Federal Budget, Australians will be stapled to a single superannuation fund for life.
The surprise policy came as part of a string of new measures aimed at reforming the $3 trillion superannuation system, in an effort to prevent workers from accumulating multiple accounts at great cost.
“Under our reforms, your super will follow you,” Treasurer Josh Frydenberg said in his Budget speech.
The initiative is aimed at slashing unnecessary fees within the super sector and was backed by Commissioner Kenneth Hayne in the aftermath of the 2018 financial services royal commission.
However, while the industry might agree on the goal of the measure, it is divided on the means of achieving it.
On one side, the retail super sector, represented by the Financial Services Council (FSC), welcomed it.
“The FSC congratulates the Government for committing to the Royal Commission’s ‘default once’ recommendation, which will prevent unnecessary account erosion from fees and the creation of new duplicate accounts,” FSC CEO Sally Loane said.
On the other side of the political aisle, industry super funds argue the government’s method could do more harm than good.
“While it is pleasing the government is tackling multiple accounts, stapling workers to a single fund could leave them stuck in a dud fund for life, costing them hundreds of thousands of dollars at retirement,” Industry Super Australia (ISA) chief executive Bernie Dean said.
Instead, the ISA proposed the policy makes more sense if the money, rather than the fund, is what is linked to workers,” Dean said.
“Underperformance is the biggest cost drain on member savings and dud funds need to be removed no matter what type of fund they are.”
Advocacy group Super Consumers Australia (SCA), however, remains more optimistic that the reforms will help Australians “get a fair deal from our superannuation deal”.
“These reforms clean up zombie accounts that have eaten away people’s retirement savings for too long,” SCA director Xavier O’Halloran said.
“The government has rightly recognised that for stapling to work the system needs to support people to find good performing funds for their retirement savings.”
Combined with the government proposal to create annual performance tests, O’Halloran said the sector could make “a start” on preventing new members from joining a glut of underperforming funds but maintained the government could go further.
“Measures are also needed to ensure that existing members aren’t disadvantaged by underperformers,” O’Halloran said.
“We look forward to working closely with the Government and regulators to design a system that means existing members within underperforming funds can smoothly transition to a better deal.”