Forty per cent of Australians have more than one super account, and the Australian Prudential Regulation Authority (APRA) suggests a quarter of all industry super accounts are not receiving contributions from the member or their employer.
Having more than one super account can waste money on duplicate fees and insurance costs, leaving less money for retirement.
Too often, members are unaware that they hold more than one account, or are daunted by the paperwork associated with tracking down and consolidating their super.
In the May Budget the government announced it would give the Australian Tax Office the power to consolidate members’ super accounts for them.
Under the proposal, super funds will be required to transfer inactive accounts with less than $6000 to the ATO for matching and consolidation.
If it finds a match, the member’s inactive super will be sent to their active account.
But if no match is found, the ATO will hold the money for 10 years, after which the balances are transferred to the government’s consolidated revenue.
While the money is with the ATO, it will earn a return equivalent to the inflation rate (CPI).
So the real value of the members’ money is protected, but it does not grow.
While industry funds generally support the intention of the legislation, we think there’s a better way to address the problem, and have proposed an alternative model to the parliament.
Under our proposal, members with more than one account would still have those accounts consolidated into their active account, saving on multiple fees and charges.
But, unlike the government’s proposal, where a member’s inactive account cannot be consolidated (e.g. where they have only one inactive account) the money would remain invested through a super fund with the objective of growing the super balance and achieving net returns well above CPI.
In the meantime, several industry super funds already participate in an existing cross-fund matching program.
More than 35 super funds transfer their members’ inactive and unclaimed accounts to AUSfund, a special type of super fund established especially to look after small lost and inactive accounts and to transfer the money to individuals’ active super account.
While these super accounts are held in AUSfund, members’ money is invested with the aim of delivering an investment return that is well above CPI.
Many industry super funds along with Industry Fund Services (IFS) and Industry Super Australia (ISA) are now working together to build a bigger and better cross-fund matching program to reunite as many members as possible with their inactive super before a possible transfer to the ATO.
What you can do
In the meantime, track down any of your super accounts that may be inactive so the balance can be transferred to your main active account.
Often multiple accounts result from a new super account being opened when we change jobs.
The sooner these inactive accounts close, the sooner money stops being wasted on duplicate fees and insurance costs.
Remember to check with your superannuation provider about any fees and charges, or loss of insurance or benefits that may apply before transferring your accounts.
The information in this article is general information only and does not take into account your personal financial situation or needs. Before deciding whether to move or rollover your super, you should read the relevant Product Disclosure Statements and consider whether you should speak to a financial planner.