Paul's Insights: Super savings benefit from Budget reforms
Australia's super savings are now worth more than $3 trillion. That's good news, but there are weak spots in the system including over $20 billion in lost and forgotten accounts, and close to four in ten people still have more than one super account.
Having multiple super balances not only makes it harder to keep track of your retirement savings, it also means doubling up on fund fees and unnecessary life insurance premiums. Both will white ant your retirement nest egg. Already Australians are paying $450 million a year in unnecessary fees as a result of multiple accounts.
So it’s good news that the latest Federal Budget includes steps to help workers stick with just one super fund through their working life. Treasurer Josh Frydenberg announced that new super accounts will no longer be automatically created every time a worker changes jobs.
We’ve been able to take our super with us from job to job for many years now, however the sheer volume of multiple accounts shows this doesn’t always happen. The downside of the Budget reform that will see workers stapled to a particular fund is that it could mean being locked in to a poor performer. This makes it especially important to select a decent super fund in the first place. Happily, reforms are on the agenda here too.
With over 200 different retail and industry super funds to choose from, it’s not easy comparing funds. That should change with the launch of a new online comparison tool known as ‘YourSuper’ to be maintained by the Tax Office. It will allow a straightforward comparison of fees and returns across super funds.
In addition, funds that consistently dish up poor results will be encouraged to lift their game. Super funds will be required to meet an annual performance test set by regulator APRA. Repeat poor performers will have to explain their lacklustre results to members, and may even be banned from taking on new members.
The upshot of measures is that our super savings are set to benefit to the tune of $17.9 billion over the next decade.
But why wait for the Budget measures to pass through parliament? It’s always a good idea to take a look at your super at least quarterly to see how your account balance is tracking. If you have multiple super accounts, consider folding the lot into one fund. Head to the website of the super fund you want to hold onto for details of how to do this. It shouldn’t cost more than a few minutes of your time.
Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.