The Your Future, Your Super package passed the senate 34 to 30 after the government made amendments to the bill, most notably changes Senator Pauline Hanson pushed for.

Under the new laws, duplicate accounts will be removed, while underperforming superannuation funds will be forced to lift their game.

Treasurer Josh Frydenberg said the overhaul of the $3.2 trillion superannuation pool will save consumers more than $17 billion.

But how will the new laws impact you?

Stapling and duplicate accounts

As part of the new reforms, workers will no longer be required to share their superannuation details with each new employee to ensure they're using the same fund when they change jobs. 

From 1 November 2021, the new ‘stapling’ mechanisms will kick in meaning when workers change jobs, they will automatically be kept in their existing superannuation fund.

“Let’s not forget that Australians pay more than $30 billion in superannuation fees and charges every year,” Mr Frydenberg said on Thursday.

“Yet many Australians don’t know the amount they have in super or indeed that it is their money to access.”

While the package is designed to reduce the unintended consequences of multiple superannuation funds, industry experts have heavily criticised this new measure.

According to Industry Super Australia (ISA), the Your Future, Your Super legislation staples millions of members into inferior super products that would either fail new performance tests or are shielded from them altogether.

“Many workers will lose out from this bill after the Senate condemned them to spending decades stuck in a dud super fund,” said ISA chief executive Bernie Dean.

“It’s even more important that Australians engage with their super and find a high-quality fund with low fees and good returns, given that these laws create a risk that millions could be locked into inferior products.”

With the changes to superannuation just around the corner, members are now being warned to check their super insurance. 

Weeding out underperformers

Another key change will require super funds to complete an annual test.

Under this performance test, administered by the Australian Prudential Regulation Authority (APRA), default super products, also known as MySuper products, will be ranked annually.

Those who perform 50 basis points (0.5 per cent) below the benchmark will be considered an underperforming fund.

Members of a dud superannuation fund will receive a letter from their trustee within 28 if the fund fails the test. Should the fund fail twice in a row, the government will be able to block the fund from taking on new members.

About two-thirds of super products are non-MySuper products and will not be covered by the legislation initially. They are expected to be added to the annual performance testing framework in 2022.

According to Super Consumers Australia, the new reforms will help weed out underperforming funds by making it unsustainable for them to survive.

“The YourSuper fund comparison tool will shine a light on the best products on the market. For the first time, people will be able to compare and easily find a better deal,” said Super Consumers Australia director Xavier O’Halloran.

Best financial interest

Moreover, superannuation funds will be asked to justify their expenses under the new reforms called the best financial interests test.

One of the key proposals under the Your Future, Your Super reforms is an amendment to Superannuation Industry Act 1993, which would change the best interests duty to specifically requiring trustees to act in members’ “best financial interests” across all investment types and expenditures.

It will also bring in regulations allowing for certain payments or investments to be banned, even if superannuation funds argue it is in the best financial interests of members.

The “best financial interests” test has been criticised by the super sector for the reverse onus it places on funds to prove that all expenditure, regardless of its value, was in members’ best financial interests.

Additional contributions 

Australians will also be supported to make additional contributions to their superannuation to make up for amounts that they may have withdrawn due to COVID-19.

From the 2021-22 financial year, individuals who released superannuation under the COVID-19 early release scheme will have the option of recontributing these amounts as non-concessional contributions, over and above the existing caps.

Veto powers denied

The most controversial part of the Your Future, Your Super legislation has now been dumped by the government after being heavily criticised by industry experts and members of the Parliament alike.

Under the sweeping reforms, the government sought to give the Treasurer the power to block any investments made by superannuation funds.

ACTU assistant secretary Scott Connolly previously warned nestegg that this legislation would have allowed governments to block any project that was not politically aligned even if it was in the members’ long-term best interests.

“The Hayne royal commission found industry superannuation funds already act in the best financial interests of members. Under these laws, the government is proposing a new unnecessary legislative standard for funds that this proposal explicitly excuses the government from complying with. It is both ludicrous and hypocritical that the government is not held to the same standards proposed for funds.”

“If superannuation funds must act in the best financial interests of members, then so should the government. It is both ludicrous and hypocritical that the government is not held to the same standards,” Mr Connolly concluded.