It’s been a big year in super with a number of significant reports, recommendations and legislative changes set to reshape the industry. Here’s a quick overview of what’s been happening and how it might affect your super.
Recommendations from the Royal Commission
On 4 February 2019, the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released.
The report is a damning indictment on the banks and their super funds, financial advisers, insurance companies and mortgage brokers. A key theme was the need for regulators to do more to enforce existing laws.
The report also reiterated many of the findings from the Productivity Commission’s assessment of the efficiency and competitiveness of the Australian super system, which was released on 10 January 2019.
This includes concerns over a lack of awareness and engagement with super and the high number of people with multiple super accounts and insurance policies they may not need.
The Royal Commission report included 76 separate recommendations — nine directly concerned with superannuation. Key recommendations include:
A ban on hawking super products
A ban on funds offering inducements to employers
Moves to ‘staple’ workers to a single default super account
Mandatory disclosure from non-independent financial advisers
Removal of grandfathered commissions
Linking financial services boss’ pay to non-financial risk measures
While both major political parties have agreed to implement most of the recommendations, any changes must be passed into legislation before they can be put in place. As such, any impact on super fund members is still some way off. We will keep you up to date about any changes in the months ahead.
In February 2019, the Government’s ‘Protecting Your Super’ package was passed into law. It included several changes that may affect your insurance cover and superannuation fees.
The new measures start on 1 July 2019. They include:
Insurance cover to be cancelled on inactive accounts
Insurance cover will be automatically removed from all inactive accounts, unless you notify us in writing that you want to keep your cover. For insurance purposes, accounts are deemed inactive if we haven’t received any contributions into your account in the last 16 months.
Inactive low-balance accounts to be transferred to the ATO
Inactive accounts with a balance less than $6,000 will automatically be transferred to the ATO. Where possible, the ATO will consolidate this balance into an active account you hold with another super fund.
For ATO purposes, your account is inactive if, in the last 16 months, we have not received a contribution into your account; and you haven’t made any updates to your account details, such as changing investment options, insurance cover, or making or amending a binding beneficiary nomination.
Removal of exit fees
Super funds will no longer be able to charge an exit fee when members change funds. Although not required by law until 1 July 2019, we implemented this change on 1 February 2019.
New cap on admin and investment fees for low-balance accounts
Administration and investment fees and costs will be capped at 3 per cent for all accounts with less than $6,000. This will reduce fee erosion on low-balance accounts.