Poorly performing super funds will have to notify members of their underperformance, and could be barred from accepting new members if they don’t improve, as part of a crackdown that the government says will save Australian workers $17.9bn over the next decade.
Super accounts will also no longer be automatically created when a worker changes jobs, and a new online comparison tool will be launched to help Australians see clearer data about super fees and fund performance, as part of reforms unveiled in Tuesday’s federal budget.
In his budget speech, the treasurer, Josh Frydenberg, said Australians were currently paying $450m a year in “unnecessary fees” as a result of 6m duplicate or redundant accounts.
“There is now $3tn in the superannuation accounts of Australians. Too many Australians are paying too much in superannuation fees,” Frydenberg said.
“At $30bn a year, the superannuation fees Australians pay exceeds the cost of household gas and electricity bills combined,” he said.
Frydenberg also explained that the prudential regulator will require super funds to meet an annual performance test, and that the data will be used in an online-comparison tool to be launched by the tax office called YourSuper.
“Poor performing funds will have nowhere to hide and will be required to notify their members of their underperformance,” Frydenberg said.
Australians entering the workforce for the first time, or those seeking to review their fund’s performance, will also be able to use the YourSuper tool to compare the performance of funds and select a new account.
As part of the reforms, the government will spend $159.6m between now and June 2025 to implement the online YourSuper tool, which will include “stapling” a member to their account to avoid future duplication.
Budget papers also state that under “future enhancements” of the tool, the government plans for this super information to be integrated into payroll software so employers are automatically provided the super information of new employees.
The move to stop duplication of super accounts is in line with a recommendation from the royal commission into misconduct in the banking, superannuation and financial services industry.
The funding will also go towards the Australian Prudential Regulation Authority, which will begin conducting benchmarking tests on funds from July next year.
Products that underperform for two consecutive years will be prohibited from receiving new members until they can prove in the following year’s test they have improved their performance.
The reforms will also include legislation to ensure that super funds’ “expenditure is motivated solely by the best financial interests of members and ensuring they disclose how they are spending members’ money”.
In addition to the super reforms, the government will also give the tax office $15.1m to “target serious and organised crime in the tax and superannuation systems”, a measure that it expects will boost the budget by $136.8m over the forward estimates period.
Industry Super Australia’s chief executive, Bernie Dean, said while it was pleasing the government was tackling multiple accounts “stapling workers to a single fund could leave them stuck in a dud fund for life” and cost them hundreds of thousands of dollars by retirement.
“Stapling the money to a member would remove multiple accounts quicker and more effectively weed out underperformers,” he said. “Underperformance is the biggest cost drain on member savings and dud funds need to be removed no matter what type of fund they are.”
Dean argued that with the government’s early release of super scheme sending millions of members accounts backwards “every dollar in saved fees and improved returns is desperately needed and will ensure members get the maximum benefit of the legislated super guarantee increase”.
