Budget 2020: Poor funds named, shamed, banned from new members

Underperforming superannuation funds will be required to disclose their poor performance and banned from taking on new members

Josh Frydenberg says the superannuation system is ‘letting too many Australians down’’

Underperforming superannuation funds will be required to disclose their poor performance and banned from taking on new members until they improve in a crackdown aimed at saving workers $17.9bn over the next decade.

Josh Frydenberg, unveiling a superannuation reform package in his budget speech on Tuesday night, also announced accounts would follow workers when they changed jobs.

The measure was part of an ­effort to stop the proliferation of multiple accounts, which was costing workers up to $450m a year.

The Treasurer said he wanted the superannuation system to work harder for Australians.

“Once implemented, these measures will benefit Australians by $17.9bn over the next 10 years,’’ Mr Frydenberg said.

He said the system as it stood was “letting too many Australians down’’.

“Australians are paying $30bn per year in superannuation fees. This is more than the $27bn Australian households pay on their energy bills or the $12bn they spend on water bills,’’ he said.

Announcement measures to improve returns, Mr Frydenberg said up to three million accounts managing more than $100bn of retirement savings were underperforming.

Under the reforms, the Australian Prudential Regulation Authority would conduct benchmarking tests on the net investment performance of MySuper products, with products that had underperformed over two consecutive annual tests prohibited from receiving new members.

This would last until a further annual test showed they were no longer underperforming. Non-MySuper accumulation products where the decisions of the trustee determine member outcomes would be added from July 1, 2022. Funding for the initiative would be met through an increase in levies on regulated financial institutions

Under a reform package to take effect from July 2021, fund members would also have access to a new interactive online YourSuper comparison tool that would encourage funds to compete harder.

Mr Frydenberg said the government would hold funds to account for underperformance and encourage them to lower costs.

He said the reforms would ­reduce waste in the system and save workers $17.9bn.

The budget measures also announced a series of transparency measures to increase the visibility of spending and investments.

Trustees would face strengthened accountability measures with increased obligations to ensure trustees acted in the best financial interests of members. The government will also ­require funds to provide better information on how they manage and spend members’ money in ­advance of Annual Members’ Meetings.

The reform package, dubbed “Your Future, Your Super’’, follows a push to consolidate the $2.9bn held in unintended multiple accounts on behalf of 1.4 million Australians.

The government has also capped fees on low balance accounts, banned exit fees and ensured younger Australians do not pay unnecessary insurance.

The government is still considering whether to raise the superannuation guarantee to 9.5 per cent in July amid a debate about whether to pass savings on in wages or lift retirement savings.

The decisions is likely to be delayed until next year when economic conditions become clearer.

The government has also extended to December 31 the deadline for accessing up to $10,000 from superannuation in 2019-20.

The budget also set aside $15.1m to the Australian Taxation Office to target serious and organised crime in the tax and superannuation systems.