Super reforms should make funds work harder for retirees

Every day, you make thousands of decisions that shape your life – whether to pack a lunch or buy it, whether to walk to work or drive, where you bank. You are uniquely qualified to make decisions that work best for you.

But sometimes decisions are complicated, particularly decisions about superannuation.

Often Australians find that they have accidentally ended up with multiple funds when they change jobs. And some of those funds have disappointed in their duty to protect and grow your retirement savings.

Over the past two years the government has been reforming these inefficiencies; capping fees on low balances and preventing fees being charged to switch funds, limiting circumstances when insurance premiums can be charged, consolidating duplicate low-balance and inactive accounts to your current superfund, and applying penalties to trustees who don’t act in your best interest. These changes have been incremental – you may not even have noticed them – but over the coming decades they will add billions of dollars to the retirement savings of millions of Australians.

However, there are still funds out there that are persistently underperforming, but it’s hard to tell which ones they are and what the alternatives might be. There are still funds who don’t think twice about how they are spending your retirement savings. And while we’ve consolidated much of the stock of duplicate funds, each time you change jobs, there’s a chance that you’ll accidentally open yet another. There’s still more to do.

In last year’s budget we announced the Your Future, Your Super reforms; changes that will save Australians $17.9 billion over 10 years.

It works in four ways.

First, when you change jobs, your super fund will move with you. If you don’t nominate a fund your new employer will work with the ATO to find your active super account. No more accidentally doubling up (and paying multiple sets of fees).

Second, we are bringing you a new online comparison tool on the ATO website, covering default fund performance and fees. This will make it easier for you to find a great option, and boost competition in the system.

Third, we will impose transparent standards for performance in default super funds. If, on average, over an eight-year period, your fund underperforms its own benchmark by half a per cent, your fund will have to tell you that they’ve not lived up to expectations. Moreover, if a fund’s performance is sub-par two years in a row, it won’t be permitted to accept new members – no more dud funds hiding behind glossy reports or behind the advertising skirts of other better performing funds.

Finally, we will clarify that the trustees put in charge of your super, in everything they do, must act in your best financial interests. This means that funds will have to justify to the regulator how they spend your money – in everything from their investment decisions through to their marketing and sponsorships. Super funds can’t borrow – the only money they spend is yours, so every cent should go towards earning you a better retirement.

These measures are all about driving competition, transparency and choice. You know what’s best for you.

Senator Jane Hume is Minister for Superannuation, Financial Services and the Digital Economy