In a welcome change that will reduce the number of people with duplicate superannuation accounts, the Government has announced that from 1 July 2021 an employees super account will be ‘stapled’ to them when they change jobs. Stapled super accounts will mean that when a new employee commences work and doesn’t nominate their chosen superannuation fund, rather than the employer setting up a new default account they will instead obtain the super account details from the ATO and pay contributions to that account.
Stapled super accounts to move with employment
The change is part of the ‘Your Future, Your Super’ package announced as a part of the 2020-21 Federal Budget.
The key part of this is a new default superannuation scheme where superannuation will follow an individual when they change jobs, reducing the number of duplicate accounts held by employees, as well as helping prevent new members joining underperforming funds.
Ensuring that superannuation accounts are ‘stapled’ to a member when changing jobs will reduce the number of duplicate accounts in the system and, in turn, reduce fees. These reforms will save Australians an estimated $17.9 billion over 10 years.
The Australian Taxation Office will develop systems so that new employees will be able to select a superannuation product from a table of MySuper products through the YourSuper portal.
The YourSuper tool will provide a table of simple super products (MySuper) ranked by fees and investment returns.The aim of the tool is to make it easier for individuals to compare the fees and performance of superannuation funds in the market creating more competition in the market.
Increased benchmarking tests on APRA funds
Australian Prudential Regulation Authority (APRA) will conduct benchmarking tests on the net investment performance of MySuper products, with products that have underperformed over two consecutive annual tests prohibited from receiving new members until a further annual test that shows they are no longer underperforming.
If a fund is deemed to be underperforming, it will need to inform its members of its underperformance by 1 October 2021.
By 1 July 2021:
- Super trustees will be required to comply with a new duty to act in the best financial interests of members.
- Trustees must demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests.
- Trustees will provide members with key information regarding how they manage and spend their money in advance of Annual Members’ Meetings
YourSuper online comparison tool
A new, interactive, online YourSuper comparison tool will help individuals decide which super product best meets their needs.
By 1 July 2021, the YourSuper tool will:
- Provide a table of simple super products (MySuper) ranked by fees and investment returns.
- Link you to super fund websites where you can choose a MySuper product.
- Show your current super accounts and prompt you to consider consolidating accounts if you have more than one.
This tool will make it easier for people to compare the fees and performance of super funds in the market, creating more competition and making super funds work harder to attract and retain members.
Comparing different superannuation fund accounts has always been challenging. There is already a online comparison tool for MySuper funds via the MoneySmart website and online investment platform Stockspot also publishes the annual FatCat report which compares 600 of the largest superannuation funds investment options in Australia.
Benefits of stapled super accounts
The introduction of stapled super accounts is a welcome change that will ensure individuals will be better off in retirement through ensuring they don’t pay unnecessary superannuation fees through having duplicate accounts or through being stuck with an underperforming fund.
Stapled super accounts also dovetail into other another recent change to super : Your Superannuation, Your Choice which provides choice of super for an additional 800,000 workers who were previously locked into a superannuation fund under a workplace agreement or legacy enterprise bargaining arrangement.
Another benefit should be increased engagement with superannuation which may also lead to an increased numbers of individuals looking to take control of their retirement savings via a self-managed superannuation fund (SMSF).
If you have any question regarding these changes or would like more information how they will impact you or your business, please get in touch with our team.