AustralianSuper and Hesta fall in behind Cbus, cutting pension minimums
Two more of the biggest super funds have folded on the controversial issue of pension minimums as the industry splits on the issue.
Two more of Australia’s biggest super funds have bowed to consumer pressure over the controversial imposition of pension minimums.
AustralianSuper and Hesta took just days to follow rival Cbus in changing their terms for low-income savers.
The controversial minimum pension rule penalises investors by preventing them from receiving a pension unless their accounts meet a minimum balance.
The Australian reported earlier this week that Cbus had thrown down the gauntlet to the wider industry when it cut its pension minimum to zero.
In a clear reaction to the Cbus move, AustralianSuper and Hesta have responded swiftly to the change, but they have not fully dropped the controversial rule.
Instead, both funds have cut their minimums from $50,000 to $10,000.
Consumer advocates suggest the moves from the big funds are a step in the right direction, but want to see all funds drop all minimums.
“It is disappointing that two of the biggest funds did not go the whole way and scrap the minimums entirely,” Super Consumers Australia deputy chief executive Katrina Ellis said.
When Cbus announced the move to scrap the minimums completely its chief executive Kristian Fok said: “Cbus is removing minimum balance requirements to open or maintain an account-based pension, ensuring all members – regardless of their super balance – can access the retirement products they need and want.”
Consumer groups have been emboldened by a Treasury paper earlier this year, which clearly backed dropping pension minimums.
Among the larger funds still in the spotlight is Australian Retirement Trust, which has a minimum of $30,000.
A spokesperson for the fund told The Australian the fund is actively reviewing its pension minimum settings.
Across the super sector, minimum funds remain in place at most funds while the dollar barrier imposed by the funds ranges widely. Aware Super has a minimum of $20,000, and Rest has a minimum of $10,000.
A report by the super policy think tank The Conexus Institute last year indicated that up to one million Australians would fall into the grey area between retiring with money in super but not enough for a super pension stream.
In a statement, AustralianSuper defended its decision to retain a $10,000 limit.
“Having no minimum broadens the prospect retirees could face meaningful fee erosion,” it said.
AustralianSuper and Hesta will commence the new terms in October.
“We don’t think these limits should exist in any fund,” Ms Ellis said.
“Super funds that retain these barriers are putting their interests ahead of their members.”
With the gradual increase in the super guarantee, where every worker must now put 12 per cent of their salary package into super by law, larger funds will have more money flowing onto the books and more workers who fall into the grey area where pension minimums affect an estimated 50,000 investors each year.
Pension account minimums are in place at both retail and industry funds.
However, the issue is most pressing at large industry funds, which have a substantial portion of low-balance members.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout