Pension account minimums: Big super’s rotten rule is finally under pressure

Big super’s unnecessary restriction on low-income savers is crumbling as Cbus seizes the opportunity to take the lead.

Big funds ban almost a million low-income investors from receiving a pension due to minimum balance rules, but Cbus has opened its doors. Picture: iStock

Pension account minimums, one of the rotten rules in the Australian superannuation sector, may finally be facing a reckoning.

The controversial rule, which penalises low-income savers by preventing them from receiving a pension unless their accounts meet a minimum balance, is now in the spotlight after Cbus dropped its minimum requirement.

The move by one of the nation’s biggest funds – which is rebuilding its reputation after a horror year in 2024 – throws down the gauntlet to arch rivals at the big end of town that have steadfastly refused to move on the issue.

Cbus retained an official minimum of $10,000 on its website, but the figure quoted by its call centre staff was $20,000. The move by Cbus follows protests from Super Consumers Australia, which has accused large funds of “punishing” savers who did not have enough super.

Despite the move by Cbus – chaired by former treasurer and ALP national president Wayne Swan – the majority of big super funds still demand minimum account balances, affecting an estimated one million older Australians.

Cbus, chaired by former treasurer and ALP national president Wayne Swan, has dropped its minimum balance requirement. Picture: Martin Ollman/NewsWire

Super Consumers Australia reports that some of the highest pension-account minimums are at AustralianSuper and Hesta ($50,000), while Australian Retirement Trust’s minimum is $30,000.

David Bell, the executive director of the Conexus Institute, a retirement policy think tank, says: “We did not expect this move.

“The pressure is now on funds that have high minimums, such as AustralianSuper and Hesta, to make similar changes.”

Federal Treasury recently published a paper on retirement income and clearly backed dropping minimums.

It suggested funds should “allow all members that meet a relevant condition of release access to a retirement income solution that includes an account-based pension component, irrespective of account balance”.

Industry analysts suggest that the retention of pension minimums across the super sector actively prevents 50,000 less well-off Australians each year from accessing pensions. The issue is most pressing at large industry funds, which have a substantial portion of low-balance members.

A handful of big funds – both industry and retail – do not demand minimums, undermining industry arguments that they are necessary.

AMP Super Fund, MLC, REI Super and Australian Food Super do not have minimums.

Super funds justify minimums on the basis that it is not efficient to administer pensions for small balances; they also express concerns that pension drawdown rules make low-balance pensions problematic.

The prevalence of account minimums also excludes older Australians from receiving other benefits linked with a pension, such as “retirement bonuses” – where funds reward members for staying with them into their retirement phase.

Retirement bonus payments can run up to around $10,000 and are also prompting criticism.

“We don’t know how these payments are made, or on what basis,” said Adam Miliszewski of Signate Private Wealth. “All we know for sure is that there are winners and losers here.”

As Bell suggests: “It’s time for the big funds to ask: what’s the purpose of what they’re doing for their members? We think every member in Australia should be able to have access to a pension.’