Rod Myer* explains what the new superannuation rules coming into effect on 30 June mean for account holders.
Photo: Alizee Marchand
With the calendar barrelling towards 1 July, a range of new superannuation laws are about to apply — here’s what they mean for you.
While the new measures address a range of issues, the most significant changes are aimed at small superannuation balances being eroded by unnecessary fees and charges.
Fees on small balances
Australians have 21 million superannuation accounts spread among only 15.6 million fund members, meaning many of us have funds we don’t need.
These additional accounts still charge fees, and in some cases unwitting members can be paying big money to keep their accounts open.
For accounts with small balances, this can have a devastating effect as at least part of the annual fees charged by funds are flat dollar amounts, which often represent a huge percentage of the total savings.
That’s set to change though, as no super fund will be able to charge more than 3 per cent on balances below $6,000 from 1 July.
Exit fees foisted upon members when they choose to move their money into a new fund will also be removed, in a move slated to save members $52 million a year.
Do you need insurance?
Another more controversial change will see insurance provided through superannuation be offered on an opt-in basis for accounts that have not been touched for 16 months.
Until now, all accounts needed to have death and total and permanent disability insurance (incurring additional fees), and anyone wanting to bail out had to make that stipulation to their fund.
The new system will reverse that for particular cohorts, but Dr Martin Fahy, CEO of the Association of Superannuation Funds of Australia (ASFA), sees big problems with the new model.
“We have to avoid the dreadful situation where someone who is a breadwinner dies or is incapacitated, leaving their dependents with no support,” Dr Fahy told The New Daily.
“That would be devastating.”
To get around that problem ASFA has developed a portal in its own website called “Time To Check”, which provides members with the details they need to consider when thinking about insurance.
“Our campaign is aimed at getting people to make active choices and consider their personal situations,” Dr Fahy said.
So, if you are in any of the categories affected, you need to think about your needs and responsibilities to those around you.
If you decide to keep up your insurance then make sure you contact your fund by 30 June to tell them.
Auto-consolidation
In another move targeting accounts with small balances, the Australian Taxation Office (ATO) will begin sweeping up funds with less than $6,000 invested or that haven’t been touched for 16 months and paying minimal returns to the owner.
The ATO will then go on a hunt to find another active fund registered to the same holder and merge the old funds into the current account.
The idea is that your funds will be consolidated in one spot to minimise fees and costs.
Accounts that are not able to be auto-consolidated are directed into consolidated revenue until they are claimed, meaning seasonal workers and irregular employees who don’t want the ATO to hoover up their savings will need to notify their fund of their wishes by 30 June.
For retirees
A number of new measures will apply to retirees from 1 July and will give them greater possibilities to contribute.
Pensioners will be able to earn $50 more a fortnight (a total of $300) and still keep a full pension.
Additionally, retirees (aged between 65 and 74) with a super balance of less than $300,000 will be permitted to make voluntary superannuation contributions for the initial year of their retirement without meeting a work test.
People in that category will be able to contribute $25,000 in concessional (tax deductible) payments and up to $300,000 in non-concessional payments.
* Rod Myer is a journalist, poet and biographer and Editor of YourSuper. He tweets at @RodMyer1.
This article first appeared at thenewdaily.com.au.
