Bill Shorten says his proposed changes to superannuation will increase retirement savings by about $40,000 for a 30-year-old worker earning average fulltime wages. This claim, along with proposals to change superannuation, were made last month by the Minister for Financial Services and Superannuation, who says the 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 CEOs. “It’s dangerous to say savings across the board will be that much,” says Julie Lander, CEO of CareSuper. “Members should be wary about broad brush strokes as funds will have to spend money to implement MySuper,” says Lander. Michelle Griffiths, CEO of AvSuper, agrees.
“The Government suggests considerable savings can be made. 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,” Griffiths says. “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, the new default superannuation vehicles, will have a single investment strategy and a standard set of fees and must be available from October 1, 2013.
By July 1, 2017, funds will have to transfer their defaultbalances to a MySuper product, Shorten says. Fiona Reynolds, CEO of the Australian Institute of Superannuation Trustees, says MySuper should ensure that default products are transparent and do not pay commissions to financial planners. But members of bank-owned super funds will keep paying commissions until they are completely banned from MySuper in 2017, she says. Shorten says funds will be able to offer workplaces with more than 500 employees a tailored MySuper product. He says there will be new processes for locating and consolidating lost or inactive superannuation accounts under $10,000 into a member’s current active account. Reynolds says this cap should be removed so consolidation efforts retrieve the $19 billion in “lost super”.