Budget changes super for the better

The 2020 Federal Budget contains a simple but powerful change to put you in more control of greater super.

The 2020 Federal Budget contains a simple but powerful change to help prevent duplicate super accounts. It means a great many Australians will be better off in the future, thanks to a change that costs them nothing.

Until now, when you started your first job, you would join the super fund chosen by your employer – their default fund - unless you selected your own. Each time you changed your job, if you didn’t choose again, your new employer would put you in their default fund, adding another account. So people could end up with as many super accounts as they had jobs on their CV! That’s multiple super funds deducting multiple fees and potentially insurance premiums as well.

This year’s Budget seeks to reverse that. When you change to a new job, your new employer must contribute to your existing super account, unless you request otherwise.

This means people will now have the same super fund as they move from job to job, and may benefit from the savings. Government projections of the fee and cost savings show one fund for life could mean many thousands of dollars more in retirement.

“No one is losing anything,” says Mercer’s Technical Advice Specialist, Anthony Williams. “But by reversing the choice of default from employer to employee, employees may be protected from having multiple funds and all the inefficiencies that entails.”

Everyone still has a choice of super fund and can choose to change their fund at any time, which is one of the reasons for another important initiative in the 2020 Federal Budget.

Understanding your super

The Government will be setting up a YourSuper web site that will help members compare the performance of super funds, starting with the MySuper funds.

It’s difficult to compare funds, because funds invest differently. So the performance of each fund on the site will be measured against benchmarks determined by the superannuation regulator, the Australian Prudential Regulation Authority. The annual rating the fund receives will be an average of eight years’ performance.

If a fund underperforms for the year, it must write to its members to alert them. If it underperforms two years in a row, the fund will not be allowed to admit new members until its performance improves.

This is good news for members of funds with a long history of good performance, like Mercer.

“The plan itself is good in principle,” says Anthony, “because there is a percentage of the population that is not engaged with their super and they need to be informed.”

The legislation to enact these changes is yet to be drafted, says Anthony, and some aspects may change. Mercer, as always, will work with the Government as it drafts the legislation to put super members’ interests forward.

The big benefit of the proposal, Anthony says, is that it helps Australians take the power themselves and engage with their own super. “Understanding your super and making sensible decisions is one of the biggest determinants of your financial future.”

Find how your Mercer Super is performing online via mercersuper.com

 

Issued by Mercer Outsourcing (Australia) Pty Ltd (MOAPL) ABN 83 068 908 912, Australian Financial Services Licence #411980  Mercer Superannuation (Australia) Limited (MSAL) ABN 79 004 717 533, Australian Financial Services Licence 235906, is the trustee of Mercer Super Trust ABN 19 905 422 981. Mercer Financial Advice (Australia) Pty Ltd (MFAAPL) ABN 76 153 168 293, Australian Financial Services Licence #411766.  Any advice contained in this notice is of a general nature only and does not take into account your personal needs and circumstances. Before acting on any information in this document, consider the PDS, the booklets and any other member materials sent to you. We recommend you seek professional advice from a licensed, or appropriately authorised, financial adviser if you are unsure of action to take. The value of an investment in the Mercer Super Trust may rise and fall from time to time. Neither MSAL, nor Mercer (Australia) Pty Ltd (Mercer) guarantees the investment performance, earnings or return of capital invested in the Mercer Super Trust. Past performance should not be relied upon as an indicator of future performance. ‘MERCER’ is an Australian registered trademark of Mercer ABN 32 005 315 917.  Copyright 2020 Mercer LLC. All rights reserved

 

 

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