For employers, this means they must pay into a new employee’s existing account (rather than starting them an account with the company fund, for example) unless the employee decides otherwise. The move was primarily designed to reduce the amount of unnecessary accounts people have, and prevent their retirement savings from being eaten up by fees.
In a joint announcement, senator Jane Hume, Minister for Financial Services, and Treasurer Josh Frydenberg said that every year around 850,000 duplicate accounts are created.
“Treasury has estimated that stopping the creation of millions of unintended multiple accounts over the next decade will boost balances in super by about $2.8 billion by avoiding duplicate fees and lost returns,” they said.
The changes have been in the works for a while, and came out of the banking royal commission and resulting Your Future, Your Super reforms.
Concerns over insurance
Super Consumers Australia welcomed the introduction of super ‘stapling’ but is also calling on Parliament to ban occupational exclusions from default life insurance in super.
Occupational exclusions mean default exclusions are not available, or only partially available, to certain occupations deemed high risk.
The Financial Services Council has “recognised that an unintended outcome of this new stapling regime would be that some consumers may be unable to claim on their default life insurance cover because their fund has occupational exclusions in its default group life insurance. This is despite the fact that they have been paying for this insurance through their superannuation”.
Therefore, the FSC said they will implement an enforceable standard that will prohibit FSC superannuation trustees and life insurance members from using such exclusions on any group life insurance policies.
However, Super Consumers Australia said while the FSC is making progress, it stops short of protecting new default members to a fund and “does nothing to protect the next generation of young workers who are defaulted into a fund that excludes their occupation”.
All this comes as the government reviews occupational exclusions in default insurance offer through MySuper products. The review was announced back in June, and a consultation process conducted by Treasury from September to October.