October 2020 Federal Budget – key implications for your super
AvSuper summarises the likely impact of the Federal Budget on your super and your retirement.
We’ve outlined below a summary of the key elements of this package to help you understand the proposal and any impact they may have on your retirement savings. As always, we’ll keep members informed as things progress. If you have concerns about how these Budget changes may affect you, you can call us with your questions, or make an appointment with one of our professional Member Advice Consultants to obtain advice on your specific situation.
Chief Executive Officer
Generally the announcements made as part of the Budget will have to pass as legislation before they take effect. Therefore, Budget proposals should not be taken as fact yet, even if a starting date is proposed.
Some Budget proposals have not yet been explained in detail by the Government and industry consultation on draft legislation will be required. The final legislation could therefore be different from what was announced during the Budget and start dates may be changed. As further details become available we will analyse their relevance to AvSuper and report to members as appropriate.
This year’s Federal Budget included a new package of super measures, including a new performance test for super products, new best interests obligations for trustees and the “stapling” of employees’ super accounts to them as they move between jobs.
Staple to one fund
From 1 July 2021, if an employee does not nominate a super fund when starting a new job, employers will have to pay their super contributions to the employee’s existing super fund (if they have one), rather than the employer’s default super fund as currently required. Employers will be able to access an employee’s existing super arrangements from a new ATO portal, if not provided by their new employee.
For employees without an existing super account, employer contributions will continue to be paid to the employer’s nominated default super fund, unless the employee chooses their own fund.
Over time we expect this measure should assist in reducing unwanted multiple accounts and duplicate fees for Australians. However, several matters require clarification, particularly for those members who have actively chosen to have multiple accounts with different super funds, and how the changes will align with various other legislation and industrial agreements which determine some aspects of super.
Your Super comparison tool
The ATO will launch a website portal, known as YourSuper, by July 2021. On the portal, MySuper products will be ranked by fees and investment returns over eight year periods enabling members to compare funds and visit the relevant websites. The portal will also show members their super account details and encourage consolidating if there are multiple accounts.
Impact for AvSuper
We see a risk with this proposal in that a focus on fees and past investment returns over a limited period could lead to consumers not considering a balanced comparison of performance, fees, and the various options, benefits and features available amongst different super funds – and potentially making a less than optimal choice using such limited factors. We note that funding for this initiative is expected to be charged to super funds via an increase to regulatory levies, meaning that super fund members will effectively be paying for this, not the Government.
Other key changes
From 1 July 2021, APRA will conduct an annual performance test on MySuper products, based solely on net returns to members. When APRA determines a MySuper product is underperforming, the providing super fund will need to inform their members of this and, if the underperformance continues for two consecutive years, they will not be permitted to accept new members until their performance improves. It is expected that this test will be extended to other investment choice options by 1 July 2022. Funding for these performance reviews is again expected to involve increased levies on super funds, ie it will be paid for by fund members.
Trustees will be required to comply with a new duty to act in the best financial interests of members from 1 July 2021. Further, trustees will have to establish they had a reasonable basis to consider any actions as consistent with members’ best financial interests.
Trustees will also need to annually provide members with a range of detailed information about how they manage and spend their money in advance of Annual Member Meetings.
We hope you find this information useful to understand the changes proposed by the Federal Government and how they might affect you if they become law. As always, we will keep members informed about any changes as things develop or become law, so be sure to watch our website and read our Annual Report.
If you have any queries or wish to discuss your super account in details, please contact our Member Services Team by email, AvChat or calling 1300 128 751.
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