Federal Budget 2020/21 and your super
The Government has outlined some reforms for superannuation in the Federal Budget 2020/21.
These changes are yet to be legislated and are anticipated to come into place on 1 July 2021. While there are no immediate changes to your super account or the way super works, we’ll keep you updated as these reforms progress.
One fund follows you
One of the key proposals means that once a person opens a super account, it will follow them to a new job unless they choose otherwise.
This is intended to stop members paying multiple sets of fees to multiple super accounts. When you change jobs, your new employer will pay super into your existing super fund, rather than creating a new super account.
If you don’t already have a super account and don’t make a choice, then your super will be paid into your employer’s nominated default fund.
CareSuper Chief Executive Officer Julie Lander says one of the drawbacks about ‘stapling’ one super account to a person, is that people could be tied to a fund that is not suitable for them.
‘By being linked to one account through their working career, they may have an insurance policy with that fund which may not suit them into the future if they change industries. For example, a person may begin work in a new high-risk industry where their previous insurance is not fit for purpose,’ she said.
‘It will continue to be important for people to ensure that they are in a fund that invests in a way that meets their needs and performs well, in addition to assessing their insurance and service requirements.
‘The changes will have an impact on employers and how they pay super for new employees. We’ll keep our employers informed as more information becomes available.’
Annual performance test for super funds
By 1 July 2021, super funds will need to undergo an annual investment performance test for their MySuper product. Funds that underperform will have to notify members.
Ms Lander said ‘We understand the importance of protecting members from poor investment returns and high fees. We’ve proven we’re a strong performer throughout the various investment market cycles – our Balanced option is the number one fund over 20 years to 30 June 2020* according to SuperRatings, an independent ratings agency. Importantly our long-term investment strategy aims to reduce volatility and protect against market downturns while capturing the strength of positive markets. Not all funds do that.’
‘We’re also always looking for ways to reduce costs for members – our investment fees for 2019/20 for the Balanced (MySuper) option have fallen from 0.82% to 0.74%.’
An online tool to compare super funds
A new online comparison tool will be built by 1 July 2021. The tool is expected to show the MySuper comparisons, links, and members’ current accounts.
Funds to show how they spend
Funds will be required to provide more detail on how members’ money mainly derived from fees is spent, in advance of the Annual Member Meetings in 2021.
‘We support measures aimed at ensuring all funds act in the best interests of members,’ said Ms Lander.
‘As an experienced Industry SuperFund with a strong track record, our sole objective is to invest wisely for the best retirement outcome for members.’
* SuperRatings Fund Crediting Rate survey SR50 Balanced (60-76) Index – June 2020.