Standstill on super reforms to cost youngest savers $400m

Australia’s youngest superannuation members stand to lose $400 million in six months if the government fails to pass new laws.

Because members are charged a flat membership levy fees can quickly amass on small-balance ­accounts when paired with the ­administration fees and investment management fees

Australia’s youngest superannuation members and those with the smallest balances will be slugged with $400 million in fees over the next six months if the government fails to pass laws clamping down on fee-gouging in the $2.7 trillion retirement savings system.

New analysis by The Australian reveals a further $1.5 billion will be collected by the life insurance ­industry in premium revenue charged to 2.9 million savers under the age of 25, should Labor, the Greens and crossbench senators refuse to pass the Coalition’s Protecting Your Super package, which has been stalled in the Senate for six months.

The bills, first announced in the federal budget last year, seek to cap the amount of fees charged to small superannuation accounts — those holding less than $6000 — at 3 per cent a year.

The bills also carve out the charging of automatic life insurance cover for young members, allowing them to opt-in to cover if they work in a high-risk industry, such as construction.

The Morrison government is looking to test Labor’s resolve to tackle financial excess by putting the legislation to a vote in the Senate this week, as the major parties battle over who can be trusted to properly enact royal commissioner Kenneth Hayne’s recommendations stemming from his final report released last week.

 

“All of this legislation is currently in the Senate and the government calls on Bill Shorten and the Labor Party to support it,” Josh Frydenberg said.

Assistant Treasurer Stuart Robert has indicated he is willing to accept some Labor amendments, which will exempt high-risk workers from the life insurance clampdown, extend the period for which inactive super ­accounts remain idle before they are consolidated and reunited with their members through the Australian Taxation Office, and speed up the return of those savings to the rightful member.

However, Labor and the crossbench as late as yesterday were yet to see any redrafted legislation circulated by Mr Robert’s office. This was despite a separate superannuation bill gifting the regulator greater powers, and penalising funds that do not hold annual ­forums, being scheduled for debate in the Senate today.

Labor has hit back at the failure of the government to put its superannuation reforms to a vote in the Senate, which have stalled after Mr Robert couldn’t convince enough crossbench senators to ­accept the proposals without amendments. Underscoring the urgency of passing the Protecting Your Super package, The Australian can reveal that $382m in fees will be charged to the more than six million ­accounts with less than $6000 held by the largest 30 super funds between the current February sitting period and when parliament next sits in August.

Because members are charged a flat membership levy — often more than $100 a year — fees can quickly amass on small-balance ­accounts when paired with the ­administration fees and investment management fees, which are charged as a percentage of the ­assets in the account.