Why hunting your lost super is a worthwhile pursuit
If you have changed jobs, moved house or switched email addresses you could be one the millions of Australians owed $17.bn in ‘lost’ super. Here’s the easiest way to find it.
If you have changed your job, moved houses or switched email addresses, the chances are that you could be one of the millions of Australians who have a super account which is classified as lost.
And it is a significant issue. There are 7.1 million lost super accounts totalling $17.bn, which equates to one in three adults who have a lost super balance of $2500.
The lost super problem occurs because, for many, superannuation seems like a distant dream. People in their 20s and 30s have decades before they can touch their super, which occurs from age 60 onwards. As such, the younger generation is more likely to neglect super arrangements and more likely to end up with a lost super account.
But it is not just a problem for the young. ATO deputy commissioner Emma Rosenzweig says: “Even if you’ve retired you could have lost or unclaimed super. The ATO is holding $471m on behalf of people aged 65-plus.
“Superannuation is a key part of your retirement, and we want to make sure Australians are claiming the investment they’ve worked for.”
In terms of what happens to a super account if it is deemed ‘lost’ depends on the balance. If the balance is more than $6000 it will remain with the super fund where it stays invested and fees are still charged.
“If you have life insurances linked to the super account, it is very likely that these will be cancelled after 16 months under the protecting-your-super reforms that commenced from 2019.
If you have a beneficiary nomination in place, this will remain valid if it is a non-lapsing nomination. However, lapsing death benefit nominations will cease after three years.
Given the average lost super balance is much less than $6000, the bulk of lost super ends up being transferred to the tax office. After 12 months of not being able to contact the member, the super fund sells down the investments, voids any beneficiary nomination, cancels any insurance and sends the balance to the ATO.
This is where the account languishes until the owner comes forward and claims their super. Of note, if the super balance is less than $200, it can be withdrawn in full tax free, regardless of the person’s age. There is a special low balance superannuation condition of release that applies.
While the super is held at the ATO, it is not invested like a normal super fund. The balance is adjusted yearly at the rate of inflation which is currently 3.5 per cent. As such, the quicker people identify they have lost super and retrieve it from the ATO, the better.
And it is not just the lack of returns that is a concern; after we pass away we make the task of piecing together what assets we owned much harder if we have lost super.
“In estate planning, superannuation is often the most valuable asset in an estate,” Aubrey Brown Lawyers estate planning lawyer Peter Kernan says.
“But if your dependants do not know where your super is held, or there is unclaimed or lost superannuation held with the ATO, your wishes as to where your superannuation should go will be that much harder to achieve.
“It is recommended that as part of your estate planning file you maintain a list of assets, including your superannuation, that you update regularly so that your executers are able to promptly deal with the death benefits. A valid binding death benefit nomination with your super fund is also a good start.”
To check if you have lost super, there are several ways to do so. The easiest is to log into the ATO section of MyGov and check for any lost super. But if you do not have MyGov, then you can also ring the ATO. Otherwise you can lodge a lost super search request form with the ATO in the post.
The ATO has a five-step Super Health Check to avoid having your super lost in the future which entails:
● Confirming your contact details with your super fund;
● Checking employer contributions are being paid to your super fund;
● Searching for lost super;
● If you have multiple accounts, consider consolidating them;
● Review beneficiary nomination on your super account.
To reduce the chance of ending up with a lost super account in the first place, the best way for the younger generation to think about super is as the “bank account for retirement”.
When you get a job, your employer generally does not set up a new bank account to pay your wages into so why should they set up a new super account to pay your super into?
Best practice is to keep one super fund just as you would keep one bank account, and if you change jobs, provide both your banking and superannuation details to your new employer.
To put it into perspective, with the mandatory superannuation rate being 11.5 per cent, if someone does not take care of their super they are effectively wasting 4 hours per week of work.
Superannuation is there for a reason and even though retirement may not rank highly on the younger generation’s priority list, the older generation will vouch for how quickly retirement sneaks up on you, so getting the right strategy from an early age is key.
James Gerrard is principal and director of Sydney planning firm www.financialadvisor.com.au
