Changes made to superannuation legislation will provide massive benefits for all Australians

Every year Australians pay more than $30 billion in superannuation fees and charges.

It
is a huge sum, even greater than what Australians pay in their annual
household, electricity and gas bills. Reducing these fees and improving
the performance of superannuation funds is a priority for the Morrison
government.

This is why the legislation that passed through the parliament at the end of last week is so important.

It
represents the most significant changes to superannuation in 30 years
with reforms in four key areas that together will save consumers an
estimated $17.9 billion.

First, the prevention of unwanted and unneeded multiple accounts.

Each year about 1.6 million people change jobs and when they do they generate a new superannuation account.

This has led to the creation of around six million multiple accounts held by 4.4 million people.

To
prevent the balances on these unnecessary accounts being eaten away by
fees and charges, the government will now ensure that when you move jobs
your account will move with you.

The
“stapling” of one account to a person as they change jobs was a
recommendation of both the Productivity Commission and the Hayne Royal
Commission.

It is estimated that stapling, together with the
other reforms, could see someone entering the workforce as much as
$98,000 better off in retirement.

Second, members will be empowered to make more informed choices about their superannuation.

To
boost competition, lower fees and increase returns, the government will
establish a new interactive online Your Super comparison tool which is administered by the Australian Taxation Office.

It
will be the first time that members will be able to go to a single,
trusted, independent source of information to compare the fees and re-
turns of the different funds and choose the superannuation product that
is right for them.

Updated quarterly, the table will rank the
products by fees and returns, give people access to their existing
account, and link them to other fund websites should they wish to select
one of their products.

This reform will enhance informed member engagement.

Third, underperforming funds will be held to account.

Treasury
analysis indicates about a quarter of My Super products are
underperforming a benchmark developed by the Productivity Commission and
Australian Prudential Regulation Authority.

These particular funds hold over $100 billion across three million accounts and charge over $1 billion a year in fees.

To ensure they deliver better re- turns for their members, these funds will be subject to an annual performance test.

If they fail the test they will be required to notify their members and inform them of the Your Super comparison tool.

If these funds fall below the benchmark in a successive year, they will not be allowed to take new members.

Only when their performance improves will these funds be able to reopen.

It is expected this reform will de- liver members more than $10 billion in higher returns over the decade.

Finally, funds will be required to act in the best financial interests of their members.

Representing
the savings of 16 million Australians, the superannuation pool is
already around $3 trillion, enough to buy every company listed on the
ASX one and a half times over.

With more than $120 billion a year
being paid into the system, through compulsory and voluntary
contributions, the superannuation pool is expected to reach a phenomenal
$5 trillion by 2034.

It is vitally important these funds are invested only in assets that maximise people’s retirement savings.

This is why the government has legislated that funds must only act in the best financial interests of their members.

It removes ambiguity and seeks to prevent funds spending money that deviates from this sole purpose.

This
duty will work in tandem with requirements for funds to notify members
of marketing expenditures, industry associations and related party
transactions.

This
new level of transparency and accountability is vital given some funds
seemed to have forgotten their responsibilities as custodians of
members’ money.

Superannuation is a serious business, representing as it does, the life savings of millions of Australians.

It’s a good system but one that has been in need of reform.

That
is why our government has banned exit fees, capped fees on low balance
accounts, consolidated inactive accounts, made insurance opt-in for
those under 25 years of age and pursued these latest reforms that passed
the parliament last week.

The combination of these reforms will
encourage choice, boost competition and increase accountability while
lowering fees and strengthening returns.

These are not the first, or the last, reforms our government will make to superannuation.

We are determined to make superannuation work harder for every Australian.

Published in The Daily Telegraph.