Superannuation fee hit for thousands of workers

Up to 500,000 workers face huge fees after 10 industry super funds shifted their accounts.

Thousands of people will be hit with fees for the transfer of lost accounts.

Up to 500,000 workers face millions of dollars in unnecessary fees after 10 industry superannuation funds shifted their lost super accounts, worth at least $800m, into a related fund.

Australian Super, the nation’s biggest super fund, transferred 276,000 member accounts to AUSfund following the passage of new laws requiring funds to transfer inactive accounts to the Australian Taxation Office for consolidation.

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In testimony before a parliamentary committee, Australian Super chief executive Ian Silk said his fund had transferred 30,000 accounts in May and 246,000 a couple of months later to AUSfund, which charges ­annual administration fees of $11.50 per account.

Committee chairman Liberal MP Tim Wilson declared the practice “suspicious (and) clearly running against the spirit of the law to stop funds harvesting low-balance inactive account for fees”.

“By handballing the accounts to AUSfund, they reactivate low-balance inactive accounts to be charged fees for an extended ­period when the ATO would be doing it free,” he said.

Federal laws passed parliament in March requiring all super funds to transfer inactive accounts — ­defined as having received no contributions for 16 months and a balance below $6000 — to the ATO by the end of October, which would proceed to consolidate the funds and ­reunite them with workers.

The ATO doesn’t charge fees and provides funds with a return of CPI.

The new law was the “impetus” for transferring “nearly half a million member accounts for 10 participating funds” to AUSfund by the end of June, according to the 2019 annual report of Industry Super Holdings, the ultimate parent of AUSfund.

 

The balance of AUSfund hovered just above $500m between 2015 and 2018, before jumping to $1.4bn by last June. “This just seems like the ­industry fund’s ‘fees for no service’ equivalent and deserves more scrutiny,” Mr Wilson said.

Mr Silk denied AUSfund, which returned 8 per cent in the most recent period, was seeking to hold on to the unmatched ­accounts. “They don’t want to hold on to them because they will be transferred to the ATO at some point once they’ve exhausted their efforts, which frankly are more developed and more successful than the ATO’s have been,” Mr Silk said.

Mr Wilson questioned whether in the meantime the workers would be charged fees.

Mr Silk responded: “They’ll be charged fees and earn income.”

The Productivity Commission estimates a third of accounts — about 10 million — were “unintended multiple accounts”.

IOOF, a fund savaged by the royal commission into financial services last year, also appeared before the committee on Thursday and said it had sent 49,000 accounts to the ATO.

Its executives said “absolutely, categorically” they hadn’t parked inactive funds in related funds, as Australian Super had.

“Do you consider that consistent with the spirit of the legislation?” Mr Wilson said.

IOOF group general manager Frank Lombardo responded: “I agree with you, it’s not in the spirit. If you ask the question what could you do versus what should you do, you shouldn’t do that.”

Hostplus chief executive David Elia said his fund had transferred 60,000 accounts to AUSfund since 2016, but not those accounts with balances lower than $350.

REST said it had 400,000 low-balance, inactive funds that amounted to about 22 per cent of its overall member base.

The ATO has received more than 2.3 million inactive low-­balance accounts from super funds valued at $2.2bn since the laws passed.