It’s Super Important!
Superannuation is one of those topics that we all know is inherently important for our financial wellbeing, but seemingly neglect it for one reason or another. Maybe it’s too complex or convoluted, or too far in the future to contemplate.
According to the Productivity Commission, a third of accounts are unintended multiple accounts- with the combination of multiple super accounts and sub-par fund performance costing members $3.9 billion annually. It doesn’t have to be this way.
The CEO of Unity Super David Bryant hit the nail on the head when he said that “consolidating your super” should be the number one priority for your financial health this year. Those pesky fees all add up and can cost you tens of thousands of dollars.
Fortunately, new legislation was passed earlier this year in February that will help alleviate some of these pains. The reforms were aptly named the “Protecting Your Super” (PYS) Package Bill and protects the retirement savings of young people and those with low balances.
Fees will change in two main ways from 1 July 2019:
- Exit fees, including any fees for partial withdrawals, will be removed entirely from super accounts, saving the average Australian $68.
- Fees for administration and investment will be capped at 3% for accounts with balances below $6000.
To prevent inactive super account balances from being drained by insurance premiums (income protection, life and TPD being common), it will be compulsory for super funds to cancel existing insurance policies, regardless of the current balance, in any inactive super accounts. An inactive account constitutes any that has not received a contribution or rollover for a continuous 16 month period.
Expansion of Powers for the ATO:
Inactive superannuation accounts with a balance below $6000 will be transferred to the Australian Taxation Office (ATO), who will then attempt to consolidate them with a member’s active account where possible.
There won’t be any fees charged by the ATO for this, and you will earn interest equivalent to the Consumer Price Index (CPI) while they hold your super.
“Hang on. I want to keep my insurance!”
That’s fine. You have a few options:
- Contact your super fund to let them explicitly know that you want to keep your insurance despite your account being deemed ‘inactive’.
- You can log into your account online where available and use the opt-in functionality.
- You can also complete a form and submit it via email or post to your respective super fund.