Killian Plastow* says almost half the Australian workforce is paying avoidable fees on their superannuation because of unnecessary duplicate accounts.
Almost half the people in Australia’s superannuation system hold more than one account, which collectively costs $2.6 billion in additional fees each year.
Of Australia’s 15 million superannuation fund members, 40 per cent have multiple accounts, and Federal Budget estimates put the number of unnecessary duplicate accounts at 10 million.
Eva Scheerlinck (pictured), the Chief Executive of superannuation representative group the Australian Institute of Superannuation Trustees (AIST), said “every dollar counts” in superannuation and holding multiple accounts can erode overall savings.
“Having multiple accounts means you are paying two or three sets of admin fees and, quite possibly, for multiple insurance policies,” she told The New Daily.
Similarly, AustralianSuper’s Head of External Relations, Stephen McMahon said consolidation “will provide real positive outcomes” for fund members once they hit retirement by protecting them from fee-driven erosion.
“And the one simple action of consolidation into one super account will also make it easier to keep track of your savings and plan for the future,” Mr McMahon said.
Multiple accounts are a sizeable problem, which the Government and the superannuation industry are trying to solve, including through the Protecting Your Super legislation package currently before Parliament.
The package includes changes designed to preserve the nation’s retirement savings, such as tasking the Australian Taxation Office (ATO) with actively hunting down unpaid super (which is costing Australians $2.85 billion annually), and changing the rules around default group insurance so young Australians aren’t paying unnecessary premiums.
These laws would also significantly change the definition of an “inactive” account.
Currently these are defined as accounts with balances under $6,000 which haven’t received a contribution in the past five years, but under the new laws this five-year period would be dropped to only 13 months.
When a fund identifies an inactive account on their books, it is required to report it to the ATO, which then takes the lost funds and tries to match them with their rightful owner, making the redefinition of “inactive” important for the many Australians with multiple super accounts.
Consolidating your super
Australians can access their super information through the Australian Government’s online service MyGov, which links directly to the ATO to provide an overview of all accounts and the savings in each.
The MyGov website also allows fund members to roll their super over from one existing fund to another — a process Ms Scheerlinck said has made consolidation “a lot easier” than it was in the past.
Many individual funds also provide rollover services (both online and using written forms), but the receiving fund will need to get the account details of the other funds to be moved before they can move anything.
Before moving savings around, Mr McMahon said it’s important to look at the insurance coverage offered by each fund and ensuring the chosen fund provides adequate coverage.
This is especially true for people with pre-existing medical conditions, according to financial adviser and Director of Hobart-based advice firm Elevate Wealth, Matthew Hawkins.
Someone with a pre-existing condition may find one of their funds offers insurance coverage they’ll be unable to source outside of that fund, and it could even pay off to hold two accounts in this situation just to maintain that coverage, Mr Hawkins said, though this situation is rare.
Mr Hawkins also listed four other features of superannuation that people need to consider before settling on their super fund:
- The performance of each fund.
- The fees each fund charges (including possible exit fees).
- What each fund allows you to invest in.
- What other services the fund offers.
A decision as important as which fund to entrust with your retirement savings shouldn’t hinge solely on just one of these factors, Mr Hawkins said, but needs to be made based on each of them and how well they align with individual goals and objectives for retirement.
* Killian Plastow is finance and wealth journalist at The New Daily. He tweets at @KillianPlastow.
This article first appeared at thenewdaily.com.au.
