Bill Shorten says his proposed changes to superannuation will increase retirement savings by about $40,000, for a 30-year old worker earning average full-time wages.
That claim, along with proposals to change superannuation, were made today by the Minister for Financial Services and Superannuation, who says his reforms are the most significant since 9 per cent compulsory superannuation was introduced in 1992.
But the claimed retirement savings increase was questioned by some fund chief executives.
“It’s dangerous to say savings across the board will be that much,” says Julie Lander, chief executive of CareSuper, which manages money for 200,000 people in the professional, managerial, administration and service occupations.
“Members should be wary about broad brush stokes, as funds will have to spend money to implement MySuper,” says Lander.
Michelle Griffiths, chief executive of AvSuper, agrees with Lander.
“The Government suggests considerable savings can be made, although in our view it is unlikely that all members will share in the future cost savings, especially after the significant costs likely to be incurred in making what is sure to be considerable system and governance framework changes,” says Griffiths, whose fund manages money for about 6000 people in the aviation industry.
“I note the Government does not propose financial subsidisation or tax relief to offset the costs super funds will incur and be required to pass on to those members the Government is seeking to achieve better outcomes for,” she says.
Shorten says MySuper products will have a single investment strategy and a standard set of fees. From October 1, 2013, employers must make contributions to a fund offering a MySuper product for employees who have not chosen their own fund.
By July 1, 2017, funds will have to transfer their default balances to a MySuper product, Shorten says.
“October 2013 is not far away and it puts a fair bit of pressure on funds, but at least there is a transition to 2017,” says David Knox, a senior partner at Mercer, which provides actual and investment advice to government and corporate superannuation funds.
Shorten says funds will be able to offer workplaces with more than 500 employees a tailored MySuper product.
Australia’s superannuation industry manages $1.4 trillion.
“I’m confident BT Super for Life, with some tweaking, will meet MySuper requirements,” says Melanie Evans, head of superannuation and platforms at BT Financial Group, whose group manages $59 billion of superannuation money.
Shorten say there will be new processes for locating and consolidating lost or inactive superannuation accounts under $1000 into a member’s current active account.
“A significant number of people have lost track of their super,” says John Paul, CEO of AssetSuper, which has 85,000 members mostly in small and medium-sized companies. “I think here is a desire to overcome these problems.”