Super outcome: Changes finally law
Well, it has finally happened. On 17 June this year, landmark changes to the superannuation industry were finally passed into law. New arrangements for super will mean less members’ money wasted in fees and more accountability for member outcomes.
In January 2019, the Productivity Commission concluded that the super industry needed an overhaul. It found there was no real competitive tension and that the super industry was more effective at serving itself than its members.
A trail of wasted money
It found that more than $30 billion dollars a year of members’ money was being wasted in unnecessary fees. Money being transferred from the pockets of everyday Australians into the hands of finance executives without their knowledge. And it found that because super fund members don’t engage with their super, there was no real accountability for investment performance.
The industrial relations system had created this inefficiency.
Since the early 1990s, every time an Australian employee changed jobs a new super fund account was created. Sure, people could proactively consolidate their funds and more recently actively choose their super fund, but most didn’t. They just defaulted into the new fund, creating a trail of duplicated fees.
A better regime
From November 2021, all that changes. When Australians switch jobs, their super fund will follow them just like their bank account does. That’s great news for members, but bad news for super funds. When the automatic flow of new members stops, most super funds will stagnate or even shrink.
It’s harder to manage money when the pool is shrinking. And there will be nowhere to hide. New changes also mean more transparency and accountability for investment performance. A new performance test will mean that if a fund underperforms the benchmark it will be blacklisted, required to tell their members they’re in a dud fund and banned from accepting new members.
What this means for you
All of this amounts to good news for super fund members.
With so much at stake, super funds will be more careful with their expenditure. They will improve their net returns by reducing fees to members and they will be more diligent with their investment decisions.
And that’s the way it should be. Because it’s your money, not theirs.
At Daniel Crump Financial Planning we’re not tied to any super funds. So, if you’d like to learn how to identify a good super fund, give us a call. We’d love to help.
Daniel Crump is the founder of Daniel Crump Financial Planning. This article is general and does not consider your personal circumstances. If you would like advice specific to you, please visit www.danielcrumpfp.com.au or give us a call on 0418 148 622.
