Superannuation changes to stop Aussies being gouged by fees
Under a raft of new superannuation measures, there will be an end to fee gouging and multiple accounts, while badly-performing funds will be punished.
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Super fund members will no longer be left with multiple accounts, there will be an end to fee gouging and badly-performing funds will be punished under a raft of new measures.
The Federal Government is revamping the nation’s $3 trillion superannuation that will save members $17.9 billion over the next decade starting from July 1 under the Your Future, Your Super package. It includes:
• Having a worker’s superannuation account follow them when they change jobs to prevent having multiple accounts;
• Making it easier to choose a better-performing fund using a new online YourSuper comparison tool; and
• Holding funds to account who deliver poor returns for members.
Treasurer Josh Frydenberg said super fund members were getting gouged by excessive fees that cost more than Australian households’ combined annual energy bills.
“Too many Australians are paying too much in superannuation fees,” he said.
“At $30 billion a year the superannuation fees Australians pay exceeds the cost of household gas and electricity bills combined.”
Mr Frydenberg said energy bills cost households $27 billion per year while water bills cost $12 billion a year.
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Super changes to stop Aussies being gouged by fees
Under the reforms new super accounts will no longer be created each time a worker starts a new job – instead the person’s super account will follow them to their next gig.
Latest figures show Australians are paying $450 million a year in unnecessary fees due to having 6 million duplicate super accounts.
By 2034 it is estimated Australians could be paying $45 billion in superannuation fees.
And Australians have 3 million super accounts in underperforming funds totalling more than $100 billion in retirement savings.
A long-running problem for Australians has also been the ability to compare super funds but under the new measures it will soon be easier to compare apples with apples.
“To help Australians make an informed choice about who will manage their retirement savings the Government will also establish an online comparison tool known as ‘YourSuper’,” Frydenberg said.
“It will provide Australians with transparent and trusted information about fees and returns.”
The Government will also require super funds to meet an annual performance test and those who perform badly must inform their members.
These poorly-performing funds will also be stopped from taking on any new members.
Under the Federal Government’s early access to superannuation scheme rolled out during COVID-19 about 2.87 million individuals have withdrawn $35.6 billion.
The average amount withdrawn is $12,400 and applications have been processed and paid out by fund within five business days.
About 57 per cent of people who dipped into their retirement savings early did so to pay household bills, rent, mortgages and other debts.
Treasurer Josh Frydenberg repeatedly said it was the “people’s money” and they should be able to access it in time of need.
Figures from the Australian Securities and Investments Commission’s MoneySmart site found for a 30-year-old who withdraws $10,000, by retirement age at 67 it will have cost the person $21,516 in retirement savings (in today’s dollars).
Treasury predicts Australians will withdraw $42 billion by the time the scheme closes.
Compulsory super payments are legislated to rise from 9.5 per cent to 10 per cent in July next year and up to 12 per cent by 2025.
The Reserve Bank of Australia governor Philip Lowe said lifting the super guarantee from the current 9.5 per cent would result in reduced wages, cut consumer spend and could cost jobs.
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Originally published as Superannuation changes to stop Aussies being gouged by fees