It’s taken more than two years but we finally have a picture of what our new super system is meant to look like. Well, almost. FIONA REYNOLDS, CEO of AIST, writes.
After hundreds of hours spent in consultation and many more pages worth of submissions, the long-awaited release of the Government’s Stronger Super reform package has arrived. The package, together with the proposal to increase the Superannuation Guarantee to 12 per cent and the Future of Financial Advice reforms, means our industry is heading for some big changes in the coming decade. From how super is recorded on the payslip of every worker, through to the way default retirement savings are invested – just about every stage of the superannuation process will be affected by the new reforms. But while those inside the industry know what Stronger Super’s all about, what does it actually mean for most Australians? Well, firstly, it’s important to remember that MySuper isn’t a dumbeddown product. While MySuper will be advantageous for the disengaged, it’s not just for them. There are plenty of intelligent, engaged and “super educated” people who choose to be invested in the default or balanced option of their fund.
In fact, it’s where more than 80 per cent of Australians are currently. Plenty of these members will choose MySuper too. Importantly, MySuper will provide an important consumer safety net and see the end to commissions on default super contributions. While this was never an issue for members of not-for-profit funds, it was for many other Australians whose retirement savings were being whittled away by unnecessary fees. For top-performing not-for-profit funds, MySuper will be something of a rebranding exercise: the transition will hopefully be relatively seamless given that the default members of these funds already belong to well-managed, costeffective products.
Then there’s SuperStream. In addition to bringing the back offices of super funds into the 21st century, it will also benefit many Australians by assisting them to consolidate their super accounts. Although this will go some way towards solving Australia’s $19 billion lost super problem, the reforms stop short of having a dramatic impact, with the imposition of a cap of $1000 initially, and then increasing to $10,000 by the end of 2014. If auto-consolidation is going to have a real impact, it needs to be applied to all inactive accounts, irrespective of balance size. But changes to the requirements for payslip reporting of super contributions will help workers keep track of their actual super payments, and hopefully encourage people to engage a little more with their retirement savings.