As part of the Federal Budget, the Government’s Your Future, Your Super reforms have been announced. Provided the measures are passed by Parliament, by 1 July next year, the following changes will take effect.
Stapling Employees to a Super Fund for Life
- Employees will keep their super fund when they change jobs, and thus stop the creation of unintended multiple super accounts and the erosion of super balances.
- Employers will pay super to an employee’s existing super fund unless the employee selects an alternative fund. Employers will obtain information about an employee’s existing super fund from the ATO by logging onto ATO online services.
- If an employee does not have an existing super account and does not make a decision regarding a fund, the employer will pay the employee’s superannuation into their nominated default fund.
YourSuper Comparison Tool
A new, interactive, online comparison tool will help members decide which super product best meets their needs. The YourSuper tool will:
- Provide a table of simple super products (MySuper) ranked by fees and investment returns.
- Link to super fund websites where members can choose a MySuper product.
- Show a member’s current super accounts and prompt them to consider consolidating if they have more than one.
Annual Super Fund Performance Test
- MySuper products will be subject to an annual performance test.
- If a fund is determined to be underperforming, it will need to tell its members of its underperformance by 1 October 2021.
- When funds communicate their underperformance to members, they will also be required to provide information about the YourSuper comparison tool.
- Underperforming funds will be listed as underperforming on the YourSuper comparison tool until their performance improves.
- Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members. These funds will not be able to re-open to new members unless their performance improves.
- By 1 July 2022, annual performance tests will be extended to other superannuation products.
New Best Financial Interests Test for Trustees
- Trustees will be required to comply with a new duty to act in the best financial interests of members.
- Trustees must demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests.
- Trustees will provide members with key information regarding how they manage and spend their money in advance of Annual Members’ Meetings.
The Federal Budget did not announce any change to early release arrangements, freezing the SG, or launching an insurance review.
IQ have been full steam ahead in working through the many changes that are happening within the superannuation industry and our clients are well and truly supported by our consultants as we work through the challenges at play whilst in the midst of a global pandemic. Australians deserve a top-class retirement income system and, whilst some changes on the horizon require careful consideration and negotiation in order to ensure better outcomes for all, we are heading in the right direction.
Matt Giuliano (Managing Principal)