Fees on small balances and rollovers, insurance, and lost Super in the 2018 Federal Budget – but not much else on Super.
With the 2018 Federal Budget now out, here’s a snapshot of the changes announced for Superannuation. The Budget includes relatively few changes to Super, with announcements covering:
- Lost Super
- Post-retirement arrangements
- Fee caps on low balances
This is about the same level of change expected in pre-Budget speculation, with only a couple of small surprises. Each of the changes are designed to be positive and improve benefits, but the changes are not large scale.
These changes require legislation and the support of a majority of senators, but these measures are not generally contentious and support is likely to be forthcoming.
The Government has announced insurance changes mirroring requirements in the Insurance in Super Code of Practice:
- Automatic insurance for under 25 year old’s to be canned.
- Automatic cessation of cover for accounts not receiving contributions in 13 months.
Unlike the Code however, the Government wants to make these changes compulsory for funds. Either way, this will involve a lot of process and system changes from funds.
While these changes require legislation, passage through the Senate is likely because similar recommendations were made unanimously by a recent parliamentary inquiry.
From July 1, 2019, there will be a ban on exit fees on all Super accounts, and a 3% pa cap on fees on Super accounts with balances below $6000.
The ATO is also being funded to help find lost Super and have it sent to active Superannuation accounts – reducing the level of multiple accounts and reducing the fees impost.
There was pre-Budget speculation about a possible delay to increases in the SG from the current 9.5% and new measures to help low-income earners, but these have not eventuated.
At the same time as the Budget, the Government has released a discussion paper on post-retirement arrangements. It’s been suggested that Super funds be required to have a retirement income strategy, including things like managing longevity risk.
Since the Budget was announced, funds have had an increased level of concern about the auto-consolidation measures and changes to insurance. However, the measures remain as they were announced.
Expect some interesting times ahead.
Written by David Haynes, Head of Industry Insights