SMSFundamentals | Jul 30 2019
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Just One Fund Please
Super members want government to lead on multiple accounts and default funds.
-A quarter of super members aren't aware they have more than one account
-Nearly three-quarters want super balances automatically combined when they move jobs
-Multiple accounts and underperforming funds cost members $3.8bn a year
-Members have lost control of 6,000-plus accounts worth $17.5bn
By Nicki Boulioufas
Australians are piling more and more of their wealth into superannuation, but many remain disengaged from the system, wanting the government to take charge and consolidate their savings into a single account in a low-fee fund with a good track record.
In a new survey commissioned by Industry Super Australia, one in seven people – or 15% of those polled – said they were aware they have more than one account. However, the Australian Taxation Office says 40% of people have multiple accounts. This suggests that about 25% of super members could have more than one account and not realise it.
Nearly 16 million Australians have a super fund account. Industry Super Australia says about 5 million of these belong to an industry fund. The organisation manages collective projects on behalf of the 15 industry superannuation funds. These projects include research, policy development, government relations and advocacy, as well as the Industry SuperFunds joint marketing campaign. The recent polling was carried out on its behalf by UMR.
Three-quarters of members want government to take the lead
Some 70% of people polled for Industry Super Australia said they are in favour of the government taking steps to ensure they have only one super account. They agreed the government could do this by automatically combining their super when they change jobs, an option supported by 71% of those polled, or allocating them to a single fund for life, an option with 69% support.
At the same time, people are concerned about getting stuck in a poorly performing fund, with about 70% agreeing that default funds should have low fees and a history of good performance. By contrast, only 30% supported a less regulated framework, in which employers could choose any fund they want as their default fund, regardless of its quality.
Industry Super Australia acting chief executive Matthew Linden said the results underline the need for the government to stop the proliferation of accounts and implement reforms that enhance consumer protections, not undermine them.
"The last thing chronically disengaged consumers want to worry about is trying to consolidate old super accounts," Mr Linden said.
"Nor do they want to get to retirement and wake up to the fact that they have lost hundreds of thousands of dollars through duplicate fees and premiums."
Mr Linden said the only way to solve the problem is to automatically consolidate or combine a person's super every time they change jobs into a single, quality-checked account.
"It will take the hassle out of super for disengaged consumers and will mean more returns and more money and security for hard-working Australians in retirement," he said.
"Condemning a person to a single fund for life, regardless of its performance, could see people end up hundreds of thousands of dollars worse off by the time they retire if they are stuck in a dud fund."
Super members lose control of $17.5bn in 6,000-plus accounts
The Productivity Commission said in January that fixing the twin problems of multiple accounts and underperforming funds "could benefit members to the tune of $3.8bn each year".
In its report Superannuation: Assessing Efficiency and Competitiveness, the commission said: "Underperformers span both default and choice, and most (but not all) affected members are in retail funds."
The Australian Taxation Office says that, as at 30 June 2018, a total of 6,280 super accounts were classed as lost, unclaimed or held by the ATO on behalf of inactive or uncontactable members. The money held in these accounts totalled a massive $17.55bn.
At the end of June 2018, about a quarter of fund members had two accounts, 9% had three, and so on up to the 1% of members who had six or more. The problem is worst among people aged 41 to 50, with one in five having two or more accounts.
However, there are signs a consolidation is already under way. Between 2014 and 2017, the proportion of super members with only one or two accounts grew from 81% to 85%, while the proportion with three or more shrank from 19% to 15%.
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