Simpler super comes at a short-term cost for some members
The recent announcement by the Gillard government detailing changes to superannuation are one of many made since Labor came to power in 2007. Not all of the changes have been about increasing taxes and reducing benefits; many were about improving the current superannuation system.
Some of the changes will benefit superannuation in the long term but for members of some funds this will come at a short-term cost.
Many of the reforms announced have come from inquiries, the most influential being the Cooper review of the superannuation system. One of the findings of that review was the current system is a mishmash of many different systems that causes inefficiencies and delays. These inefficiencies result in extra costs that directly affect the amount of superannuation on retirement.
To overcome these problems, the federal government designed a simplified administration process, called SuperStream, based on standardised processing requirements and the use of electronic commerce.
Some of the benefits to flow from SuperStream are:
■Members able to keep track of their superannuation by logging onto an online portal that lists all of their superannuation accounts.
■The ability for members to consolidate different superannuation accounts electronically.
■Standardised documentation among all super funds to make it easier for members to consolidate accounts.
■Inactive accounts of less than $1000 will be automatically consolidated into another account for a member.
The rollout is happening in stages. The process of consolidating members' accounts began in July 2011 when superannuation funds were able to use members' tax file numbers to locate accounts within each fund.
From July 1, 2013, all superannuation funds including SMSFs must comply with new data standards and use e-commerce for processing rollovers and accepting contributions. Data standards and e-commerce will be mandatory for large and medium employers from July 1, 2014, with small employers subject to the same requirements from July 1, 2015.
According to research conducted by Ernst & Young, SuperStream will deliver an estimated $1 billion a year in savings for the superannuation industry.
As the Commonwealth will be implementing SuperStream, at an estimated cost of $467 million over seven years, APRA-regulated industry and commercial super funds will be required to pay a temporary SuperStream levy. The government estimates that the levy will result in a cost of about $4 for each member's account.
IOOF advised late last year that it would recoup the APRA fee from its members each year it was levied until the 2018 financial year, starting with a flat-rate fee of $7.11 rather than being based on each member's balance.
By contrast, Australian Super said it would freeze its administration fee of $1.50 a week for members until 2014.
With such different approaches, it is now more necessary that ever for members to closely review their superannuation statements.