In late June, the Morrison Government partnered with One Nation and Centre Alliance to pass the Your Future, Your Super Bill.
The Bill will change the operation of default funds, introduce performance benchmarking for some funds, and significantly change the regulations that not-for-profit superannuation funds must comply with.
Currently as you change jobs or careers, if you don’t elect otherwise, you will join the workplace default fund. For most workers, this means joining your industry-appropriate default-fund like Aware Super. It means you have a fund which understands your workplace, your preferences and can tailor products and services which suit you and because most workers join their industry fund, their super is invested in a high-performing fund.
The law as passed destroys that.
From 1 November, every worker who currently has a superannuation fund will be ‘stapled’ to that fund. Rather than your super going with you, you will be tied to your first fund unless you make the deliberate choice otherwise.
While the intention of this measure is to prevent the creation of multiple superannuation accounts, the effect could be devastating for millions of Australians. It means that for roughly 3 million people who are currently in under-performing funds, they could be much worse off by the time they retire.
Not only will workers be worse off because they will be ‘stapled’ to under-performing funds, many will never be told they are in an underperforming fund. That’s because the Government has excluded some funds from performance benchmarking like for-profit funds run by banks and insurance companies.
Being stapled to your first fund may also strip many of much needed insurance. For workers in high-risk industries, insurance is often unaffordable or unavailable outside of super. This is because superannuation funds purchase group insurance without occupational exclusions that some other funds may have. Workers in high-risk industries will be left without insurance they would otherwise have access to if they joined their default fund.
The Government has also made changes to the regulations governing superannuation funds. These changes deliberately introduced a reverse-onus-of-proof on all expenses made by a fund, meaning the fund must generate a business case for any purchase, even a stapler, to comply with the law and don’t affect for-profit funds.
As usual, the Government is using weasel words and call this the “best financial interests” duty, and funds are assumed in law to be breaking the law unless they can prove otherwise. And as usual the Morrison Government is looking after their big business mates by essentially exempting for-profit funds from this duty. The Government has written the law in a such way that profits paid by funds owned by Commonwealth Bank, ANZ, NAB and Westpac are deemed in members’ “financial interests”.
This will give for-profit funds a large advantage over industry superannuation funds, something the Government has been trying to achieve since the Howard Government.
However, due to the campaigning of thousands of union members, and pressure from the public, we were able to remove the provision that would have given the Treasurer the power to cancel any investment made by a superannuation fund, including those which are in members’ “best financial interests”. Clearly these laws aren’t about your best financial interest and are about supporting for-profit funds, which were shown to operate without any regard for the best financial interest of fund members in the Royal Commission into Financial Services.
Overall, these laws will make superannuation worse for members. For those in industry funds, administration fees may be increased to compensate for all the new regulations and laws that have been lumped on them. Those in underperforming funds may never get out with the clear winners being the banks.
You can read more about this in an article by Alan Kohler in The New Daily at: https://thenewdaily.com.au/finance/2021/06/21/super-fund-changes-government/
