With the calendar barrelling towards July 1, 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 $6000 from July 1.
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 provided on an opt-in basis for accounts with which 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 Martin Fahy, CEO of the Association of Superannuation Funds of Australia, 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. That would be devastating,” Dr Fahy told The New Daily.
To get around that problem ASFA has developed a portal in its own web site 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 ad 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 to keep up your insurance then make sure you contact your fund by June 30 to tell them.
In another move targeting accounts with small balances, the Australian Taxation Office will begin sweeping up funds with less than $6000 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 June 30.
A number of new measures will apply to retirees from July 1 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 (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.
The New Daily is owned by Industry Super Holdings