Retirement
The ‘terrible’ unintended consequences of superannuation reforms
Members will be tied to an underperforming fund, creating ‘terrible’ retirement outcomes under the current stapling arrangements in the Your Future, Your Super legislation.
The ‘terrible’ unintended consequences of superannuation reforms
Members will be tied to an underperforming fund, creating ‘terrible’ retirement outcomes under the current stapling arrangements in the Your Future, Your Super legislation.
During an AIST media conference, AI groups chief policy adviser Peter Burn explained how changes to superannuation that are designed to protect members, such as stapling, will likely hurt their retirement income.
Under the government’s Your Future, Your Super reforms, from July, members’ contributions will be ‘stapled’ to a single account – effectively, superannuation for life.
While in support of the idea of removing multiple funds, Mr Burn noted that stapling achieved this purpose but at a greater cost to members.
“What that means [is] that people will face the risk of being initially defaulted into an underperforming account and staying with that throughout their working life,” Mr Burn said.
The policy officer cited the Productivity Commission, which found that 14 per cent of funds underperform, with members naturally weeding out poorer funds through creating multiple accounts throughout their working lives.
“The effect of this process is that without weeding out underperforming accounts is that after your third job, you have less than 0.5 per cent chance of having all your money in a low-performing fund,” Mr Burn explained.
“But the downside of the present proposal is that 14 per cent of people remain in a low-performing fund.”
He opined that the 0.5 per cent of people who currently have all their money in an underperforming fund will expand to 14 per cent, if the member is stapled to a default account.
“So that is a terrible outcome for those people. They end up low performance, low investment returns, high fees and they are stuck with that until retirement,” Mr Burn continued.
Despite facing its critics, the Minister for Superannuation Jane Hume has been vocal in her support of the changes, highlighting the importance of stapling, which avoids creating duplicate accounts, leaving members as much as $98,000 better off in retirement.
Ms Hume also highlighted addressing fees for younger members, which are unnecessarily reducing balances.
“Putting members’ interest bill prevented members, particularly young members, from paying for automatic insurance that is unnecessary.
“Often, these excessive premiums eroded the balances of young people that took years and years of contributions to finally increase their balance, which is not an inspiring entree into the world of compulsory super saving,” she concluded.
RELATED ARTICLES
About the author
About the author
Superannuation
Expanding super for under-18s could help close the gender super gap, says Rest
In a push to address the gender disparity in superannuation savings, Rest, one of Australia's largest profit-to-member superannuation funds, has called for a significant policy change that would allow ...Read more
Superannuation
Employment Hero pioneers real-time super payments with HeroClear integration
In a significant leap forward for Australia's payroll and superannuation systems, Employment Hero, in collaboration with Zepto and OZEDI, has successfully processed the country's first ...Read more
Superannuation
Rest launches Rest Pay to streamline superannuation payments and boost member outcomes
In a significant move aimed at enhancing compliance with upcoming superannuation regulations, Rest, one of Australia’s largest profit-to-member superannuation funds, has unveiled an innovative ...Read more
Superannuation
Rest appoints experienced governance expert to bolster superannuation fund
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Ed Waters as the new Company Secretary. Waters, who brings with him over 15 years of extensive ...Read more
Superannuation
Small businesses brace for cash flow challenges as Payday Super becomes law
With the new Payday Super legislation now enacted, small businesses across Australia are preparing for a significant shift in how they manage superannuation contributions. The law, which mandates a ...Read more
Superannuation
Rest launches Innovate RAP to support fairer super outcomes for First Nations members
In a significant move towards reconciliation and inclusivity, Rest, one of Australia's largest profit-to-member superannuation funds, has unveiled its Innovate Reconciliation Action Plan (RAP)Read more
Superannuation
Payday super legislation promises fairer retirement for part-time and casual workers
In a landmark development for the Australian workforce, the recently passed Payday Super legislation is set to transform the retirement landscape for countless part-time and casual workersRead more
Superannuation
Payday Super passes as Employment Hero, OZEDI and Zepto unite to help small businesses meet new seven-day payment rule
With the Payday Superannuation Bill officially passing through Parliament, Australian businesses are now less than eight months away from a major shift in how superannuation contributions are made — ...Read more
Superannuation
Expanding super for under-18s could help close the gender super gap, says Rest
In a push to address the gender disparity in superannuation savings, Rest, one of Australia's largest profit-to-member superannuation funds, has called for a significant policy change that would allow ...Read more
Superannuation
Employment Hero pioneers real-time super payments with HeroClear integration
In a significant leap forward for Australia's payroll and superannuation systems, Employment Hero, in collaboration with Zepto and OZEDI, has successfully processed the country's first ...Read more
Superannuation
Rest launches Rest Pay to streamline superannuation payments and boost member outcomes
In a significant move aimed at enhancing compliance with upcoming superannuation regulations, Rest, one of Australia’s largest profit-to-member superannuation funds, has unveiled an innovative ...Read more
Superannuation
Rest appoints experienced governance expert to bolster superannuation fund
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Ed Waters as the new Company Secretary. Waters, who brings with him over 15 years of extensive ...Read more
Superannuation
Small businesses brace for cash flow challenges as Payday Super becomes law
With the new Payday Super legislation now enacted, small businesses across Australia are preparing for a significant shift in how they manage superannuation contributions. The law, which mandates a ...Read more
Superannuation
Rest launches Innovate RAP to support fairer super outcomes for First Nations members
In a significant move towards reconciliation and inclusivity, Rest, one of Australia's largest profit-to-member superannuation funds, has unveiled its Innovate Reconciliation Action Plan (RAP)Read more
Superannuation
Payday super legislation promises fairer retirement for part-time and casual workers
In a landmark development for the Australian workforce, the recently passed Payday Super legislation is set to transform the retirement landscape for countless part-time and casual workersRead more
Superannuation
Payday Super passes as Employment Hero, OZEDI and Zepto unite to help small businesses meet new seven-day payment rule
With the Payday Superannuation Bill officially passing through Parliament, Australian businesses are now less than eight months away from a major shift in how superannuation contributions are made — ...Read more
