A paper released by the Association of Superannuation Funds of Australia (ASFA) has shown that unwanted and multiple funds are a burning issue for thousands of members as the government moves to right wrongs with new reforms.
As part of the Your Future, Your Super legislation, the government has announced members will be stapled to a fund for their working life.
While this has its drawbacks, including potential insurance shortfalls for members changing careers, the government believes it will help eliminate unwanted fees that are a common occurrence with multiple funds.
According to ASFA, while the YFYS reforms will see the number of unwanted funds fall by 500,000, they will not completely see money returned to members.
In fact, the association is forecasting around 2.5 million unwanted multiple superannuation accounts will remain by June 2022, adding an additional aggregate cost in the system of around $100 million per year.
Despite the significant reduction in multiple accounts, the number of lost and inactive accounts held by the Australian Taxation Office (ATO) has remained stagnant, at around 5 million accounts, despite a large flow of superannuation accounts into and out of the ATO.
“There is more work to be done to reduce the number of multiple accounts and to address the $3.6 billion in lost and unclaimed super which currently sits with the ATO,” said ASFA deputy CEO Glen McCrea.
Mr McCrea explained that not only are members getting charged multiple fees, they also end up losing when it comes to investment returns.
“ASFA estimates that superannuants stood to earn investment returns in the order of $700 million in the past year if the $3.6 billion ATO-held balances were reunited with active accounts,” Mr McCrea continued.
As such, the ASFA recommended that the ATO reunite amounts it holds whenever it can identify another account in a superannuation fund, including inactive accounts, where the combined balance will be above $6,000.
Mr McCrea clarified that while in many cases the ATO can match such accounts to a super account held by an individual, the law only allows the ATO to forward a balance when the superannuation account proper is classified as active.
While changes need to be made, a combined effort from the government and the industry to tackle unwanted multiple accounts in the system has reduced the number of lost and inactive super accounts by 13 million since 2015.
