A number of changes and reforms relevant to superannuation were announced by the Treasurer in the 2020-2021 Federal Budget.
Importantly, each of the changes announced are proposed to commence from 1 July 2021 and therefore in the short-term they give rise to no change.
In summary, the changes are:
- Introduction of “stapling”, designed to ensure that superannuation follows employees when they change jobs;
- Development of an online, interactive comparison tool called “YourSuper”, to help Australians make more informed decisions about their choice of superannuation fund;
- Increasing scrutiny of superannuation fund performance through introduction of an annual performance testing regime; and
- Improving the corporate governance of funds by ensuring superannuation trustees are more accountable and transparent in how they manage the retirement savings of their members.
1. Stapling: designed to avoid the creation of multiple accounts for individual members
While all members will retain the right to choose their preferred superannuation fund, this reform means when individuals change employment, their superannuation contributions will be paid into their existing fund.
The current arrangement whereby employers are required to have a default superannuation fund will remain in place, meaning if an employee does not have an existing superannuation account and does not choose a fund, the employee’s superannuation will be paid into that employer’s nominated default superannuation fund .
2. YourSuper: Improving members’ ability to compare performance of different super funds
The Government has advised that the Australian Tax Office (ATO) will develop an online, interactive comparison tool called YourSuper, to enable Australians to compare fund performance and decide which superannuation product is most suited to them. The tool is intended to:
- provide a table of simple superannuation products (MySuper) ranked by fees and investment returns;
- link members to superannuation fund websites where they can choose a MySuper product; and
- show members if they have multiple superannuation accounts and enable them to consolidate.
3. Increasing performance scrutiny: measuring and exposing underperforming funds
In a measure designed to hold funds to account for underperformance, the Australian Prudential Regulation Authority (APRA) will conduct annual performance tests on the net investment returns and fees of MySuper products starting from 1 July 2021.
Products that have underperformed over two consecutive annual tests will be prohibited from receiving new members until a further annual test shows they are no longer underperforming.
By 1 July 2022, annual performance tests are to be extended to other superannuation products.
4. Improving corporate governance: increasing accountability and transparency from super fund trustees
New rules designed to ensure superannuation trustees are more accountable and transparent in how they manage their members’ funds are proposed which will require trustees to:
- comply with a new duty to act in the best financial interests of members;
- demonstrate that there was a reasonable basis to support their actions being consistent with members’ best financial interests; and
- provide members with key information regarding how they manage and spend their money in advance of Annual Members’ Meetings.
We’re here to help
If you have questions about these proposed changes, and how they could affect you, our Client Service Managers are available to help. we remain dedicated to support you so that you are able to make the most of your future. If you have any questions or need assistance, please contact us by calling 1800 060 312 Monday to Friday between 8am and 8pm (AEST) or emailing firstname.lastname@example.org
Legal Super Pty Ltd ABN 37 004 455 789 is the Trustee of legalsuper ABN 60 346 078 879 and holds Australian Financial Services Licence No. 246315 under the Corporations Act 2001. This information is general information only and does not take into account your individual objectives, financial situation or needs. Accordingly, before taking any action, you should consider whether it is appropriate to you, having regard to your objectives, financial situation and needs. You should obtain a copy of legalsuper’s Product Disclosure Statement (PDS) which is available by contacting legalsuper or via its website at legalsuper.com.au before making a decision. Past performance is not a guide to future performance.