Super lost 'n' found
The federal government's initiative to reduce the mountain of "lost" superannuation money appears to be working.
The federal government's initiative to reduce the mountain of "lost" superannuation money appears to be working.There's still $5.3 billion of lost super sitting in high-fee eligible rollover funds (ERFs) but over the past year and for the first time since anyone started measuring the mountain of lost savings, the amount in ERFs has reduced.It may have been a reduction of only 1 per cent but it's a start and hopefully the beginning of a trend.Some superannuation fund managers have their own ERFs, while others hand over lost super to specialist ERF providers.As shown in the table from researcher SuperRatings, the fees on ERFs as unveiled in their product disclosure statements can be high.One ERF has a fee level of more than 7 per cent on a $1000 balance .To put that in perspective, the average fee for a large super fund is about 1.3 per cent, according to SuperRatings.But who is going to complain about the high fees when the members of the ERF are unaware of the accounts? SuperRatings estimates that the amount in fees taken by ERFs for the year ending June 30 last year was about $120 million.The government now requires lost super accounts that have less than $200 in them to be transferred to the Australian Tax Office (ATO) when there has been no contact with the owner for five years and the ERFs have tried to reunite them with their owner.That adds up to a lot of money that has been transferred to the ATO, because most of the lost accounts hold only small amounts. But the $200 limit seems to be a needless concession to the super industry by the government, which is trying to goad the funds into doing much more to repatriate the money.The trouble with this approach is that funds have a disincentive to go all out to track down members because their fees, at least partly, are based on a percentage of the money in their funds.If the money is deemed to be unidentifiable and therefore it seems unlikely the owner will be found, it has to be transferred to the ATO whatever the amount.Once the money goes to the ATO, it has a better chance of being reunited with its owners. That's because the ATO can use tax file numbers, together with its considerable data-matching computer power, to locate the owner.The government has also moved to reduce the high number of multiple accounts - where someone has two, three or more super accounts - to protect the savings from being eroded by fees. As well as being more expensive to hold money in several accounts because each will have charges, those with multiple accounts are more likely to lose track of them.Multiple accounts occur as members move between jobs or move addresses without telling their super funds.As part of the government's proposed Stronger Super reforms, funds will start consolidating the accounts of their members automatically from January 2014.From that date, inactive accounts with balances of up to $1000 will be auto-consolidated. Increasing use of tax file numbers by the ATO, super funds and ERFs and auto-consolidation from 2014 will hopefully reduce the pile of lost super and reunite it with its owners.The ATO and the Australian Prudential Regulation Authority will review whether the threshold for auto-consolidation should be lifted to at least $10,000 from $1000 if the funds do not make a concerted effort at reducing the money in lost accounts.It was only made compulsory for funds and ERFs to move their lost accounts to the ATO in 2010.The ATO now holds almost one-third of all lost super accounts but it is too early to say how successful the ATO has been in repatriating the money.Those who believe they may have unclaimed super should check the ATO's SuperSeeker search tool at ato.gov.au/superseeker or phone 13 28 65.