Budget super changes are being hailed as a huge game-changer. Here’s why
Our super system is set for a shake-up after surprise reforms announced in this week’s Budget.
The changes, which are set to be introduced next year, aim to make it easier for us to choose the right fund and stop the erosion of savings through unnecessary fees.
“These are some of the most significant structural reforms to the super system since it started,” said Professor Susan Thorp, a super expert with the University of Sydney Business School.
And here’s what that means for you.
Will I still be left with multiple super accounts?
The way our system works right now is that new super accounts are often automatically created when you change jobs.
“That means multiple sets of fees and multiple sets of insurance — and really bad outcomes,” said Xavier O’Halloran from Super Consumers Australia.
About 4.5 million people have multiple accounts — paying a total of $450 million a year in extra fees.
That’s costing them about $50,000 in retirement, according to the Productivity Commission.
But these new changes mean your super account will now follow you.
“This could be a real game-changer,” Mr O’Halloran said.
Employers will need to find your account through the ATO and will pay your super into your existing account, unless you choose another one.
But how can I choose the best super fund?
Well, there’s a new tool for that.
The Federal Government plans to introduce a new online comparison tool called YourSuper.
It’ll provide a table of super funds ranked by fees and returns, which should take some of the pain out of researching the best super account.
For now, the tool will only include the MySuper funds (low cost, default super products).
But Ms Thorp says more information is needed about the tool.
“I don’t know how you rank by both fees and returns,” she said.
“They don’t necessarily move in the same direction, so how do you do that ranking?”
Can I find out if my super fund is doing well?
Yes. The process will be easier.
Many people are stuck in an underperforming fund but aren’t aware of it.
But soon APRA (the prudential regulator) will identify the poor performers through a new annual benchmarking test.
This will be initially just for MySuper funds but will be extended to other super products in 2022.
And there’ll be nowhere for funds to hide.
“It’ll be pretty clear who the bad performers are, because you’ll be getting a letter from them saying, ‘We haven’t stacked up against the market,'” explained Mr O’Halloran.
And if funds underperform for two years in a row, they’ll be banned from taking on new members.
But what does all this mean for my insurance?
There are some concerns that having a super fund that moves with you might mean people miss out on getting the right insurance coverage for their occupation or situation.
For instance, some occupations are not covered under general insurance policies.
But there are ways to overcome this.
“Make sure you call your super fund and they can let you know if your profession or your current working arrangements mean you can get quality cover,” Mr O’Halloran suggested.
He is also calling for the introduction of universal terms and exclusions in insurance (which was also a recommendation by the Royal Commission), to make insurance coverage clearer.