The 2020 Federal Budget contains a simple but powerful change to help prevent duplicate super accounts. It means a great many Australians will be better off in the future, thanks to a change that costs them nothing.
Until now, when you started your first job, you would join the super fund chosen by your employer – their default fund - unless you selected your own. Each time you changed your job, if you didn’t choose again, your new employer would put you in their default fund, adding another account. So people could end up with as many super accounts as they had jobs on their CV! That’s multiple super funds deducting multiple fees and potentially insurance premiums as well.
This year’s Budget seeks to reverse that. When you change to a new job, your new employer must contribute to your existing super account, unless you request otherwise.
This means people will now have the same super fund as they move from job to job, and may benefit from the savings. Government projections of the fee and cost savings show one fund for life could mean many thousands of dollars more in retirement.
Industry experts generally consider that this change means no one is losing anything. By reversing the choice of default from employer to employee, employees are protected from having multiple funds and any inefficiencies that entails.
Everyone still has a choice of super fund and can choose to change their fund at any time, which is one of the reasons for another important initiative in the 2020 Federal Budget.
The Government will be setting up a YourSuper web site that will help members compare the performance of super funds, starting with the MySuper funds.
It’s difficult to compare funds, because funds invest differently. So the performance of each fund on the site will be measured against benchmarks determined by the superannuation regulator, the Australian Prudential Regulation Authority. The annual rating the fund receives will be an average of eight years’ performance.
If a fund underperforms for the year, it must write to its members to alert them. If it underperforms two years in a row, the fund will not be allowed to admit new members until its performance improves.
This is good news for members of funds with a history of good performance, like Lutheran Super.
Generally experts consider that this plan is good in principle because there is a percentage of the population not engaged with their super and this should help them to be informed.
The legislation to enact these changes is yet to be drafted and some aspects may change.
The big benefit of the proposal is that it helps Australians take the power themselves and engage with their own super. Financial advisers maintain that understanding your super and making sensible decisions is one of the biggest determinants of your financial future.
Find how Lutheran Super is performing online on the Forms and publications page under Investment performance.
This article has been prepared by LCA Nominees Pty Ltd ABN 61 008 204 939 as Trustee for Lutheran Super ABN 93 371 348 387 AFS Licence #240571 MySuper authorisation 93371348387621 for the general information of members of Lutheran Super. The information in this article includes general financial product advice which has been prepared without taking into account your objectives, financial situation or needs. We recommend that you determine the appropriateness of this advice and seek independent professional financial advice from a licensed financial adviser before acting on any information contained in this email. The Trustee reserves the right to correct any errors or omissions. Past performance should not be relied upon as an indicator of future performance.
The Lutheran Super Helpline and the Lutheran Super website are provided by Mercer Outsourcing (Australia) Pty Ltd, ABN 83 068 908 912, AFSL #411980. Address: GPO Box 4303 Melbourne VIC 3001. Tel: 1800 635 796.
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