Superannuation changes have passed Parliament. Here’s what that means

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Most of us don’t think a great deal about our superannuation until we reach a certain age and start spending it on European river cruises.

Finally, the federal government has figured that out.

Some of the most significant changes to superannuation in decades passed through Parliament on Thursday afternoon, aimed at ensuring those of us who don’t pay much attention aren’t penalised for it.

And they will force funds to own up to their members when they underperform, and potentially cop some harsh punishments too.

The changes are not everything the government wanted them to be — it had to remove a bunch of controversial measures to secure enough support to get the bill through.

Here’s what the changes mean for your retirement (and those all-important cruises).

Your fund will follow you around

Most of us get our first job as teenagers and unless it’s a cash-in-hand gig, it comes with a super fund.

It’s hard to get teenagers to care about a lot of things, and their retirement income is pretty low down the list.

So most sign up to the fund preferred by their employer. When they move on to a new job, rather than going to the hassle of taking that fund with them, many will again sign up with a new fund just because it’s easier.

You can quickly wind up with your super spread across a bunch of different funds, all charging you their own fees.

Under the new rules, the first fund you sign up with (or the fund you are with now) will be “stapled” to you. So when you move jobs, your fund will move with you.

It doesn’t mean you are stuck with that fund though. You can still change to any fund you want at any time you like.

But you won’t turn 50 and realise you’ve got 15 different super funds with 15 different sets of fees.

The changes take effect from November 1.

And not everyone is happy with them — Labor and industry super funds warn workers could find themselves stapled to poor-performing super funds without realising.

Your fund has to perform, or else

Your fund has always been obliged to let you know how it’s going. It usually sends you a detailed report each year.

But under new rules, it will be a bit easier to see if it is up to scratch.

Funds will face annual performance tests, and if they don’t meet clear benchmarks, they will be forced to write to you and let you know.

If funds miss their targets two years in a row, the government can step in and literally block that product from taking on new members until it is doing better.

The funds also face public ranking on performance and fees charged, so it will be crystal clear which ones are actually doing well.

Performance will be measured over eight years, so assessors are looking at the trend, not just a snapshot.

The first review is due by October, before the new stapling measure takes effect.

And like everything, the measure has its critics.

The test will not initially apply to all super funds — it will only measure “MySuper” products, which are the default funds employers offer their new employees.

Industry Super Australia argues some of those products excluded from the test are among the worst performing.

And they say if funds fail the test, anyone stapled to them should be moved to a better-performing option.

The government didn’t get everything it wanted

Superannuation is a controversial (and often ideologically charged) area, and change is not easy.

The federal government’s original plans included granting the Treasurer an extraordinary power to step in and veto investments made by super funds in certain circumstances.

The move was criticised as a massive overreach that could potentially allow governments to stop funds investing in things they do not like.

The government also wanted measures requiring funds to behave in the “best financial interests” of members, which might have prevented industry funds from doing things such as launching political ad campaigns or lobbying.

The measures were variously dumped from the bill as it passed through Parliament, due to opposition from Labor, many on the crossbench, and even some within the Coalition.

Even without those measures, the changes still represent some of the most significant changes to the $3.1 trillion superannuation sector in decades.

By political reporter Tom Lowrey (Original ABC Article)