Superannuation processes and protection the focus for Budget 2020
7 October 2020
The Federal Budget 2020/21 handed down yesterday shows the Government’s focus sits firmly with Australia’s economic recovery after the effects of the 2020 bushfires, floods and most significantly the COVID-19 crisis, with no changes announced to superannuation contribution caps or total super balance caps.
The main changes that were announced in the Budget in relation to superannuation focused on superannuation processes and protecting consumers, which we’ll take a look at in some more detail.
Onus on employers to contribute to employees’ pre-existing Superannuation accounts
By July 2021, employers will be required to obtain information from the Australian Tax Office (ATO) about their new employees existing superannuation fund and pay the employees’ superannuation contributions to their existing fund. This will prevent the creation of a new account when a person changes their employment and has not provided their existing superannuation details to their new employer.
This change will benefit individuals by:
Reducing the number of superannuation accounts they hold.
Consolidating their superannuation monies for investment.
Reducing the administration fees and insurance premiums being deducted from their balance.
New super fund comparison tool - YourSuper
A comparison tool called YourSuper has been announced to assist individuals to compare superannuation funds fees and historical performance and rank the funds accordingly.
The YourSuper online tool is slated for release by July 2021 and will provide links to the super funds’ websites as well as prompt individuals with multiple accounts to consider consolidating their accounts into one.
This change is likely to assist individuals in choosing a quality super fund to invest in and prevent future generations from having multiple super funds to help maximise their retirement savings.
Investment performance benchmarks from July 2021
The Government will conduct benchmark performance testing on each super fund’s net investment performance from July 2021. If a fund is deemed to be underperforming, it will need to inform its members and give them the option to move their money to a better performing fund. The fund will also be listed as underperforming on the YourSuper comparison tool.
If a fund has underperformed two years in a row, it will no longer be allowed to receive new members.
This new benchmark testing will assist individuals in selecting a suitable fund to invest in and provide them with the information to change funds if the investment begins underperforming. Along with the other measures, this will provide individuals with the information needed in order to take action to help maximise their retirement savings.
Best interest duty
The trustees of superannuation funds will be required to comply with a new best interest duty by July 2021. Trustees will be required to demonstrate how they acted in the best interest of their members when managing and investing monies within the fund.
This is a welcomed initiative that Financial Advisers already abide by - acting in their clients’ best interests is at the forefront of any product or strategic recommendations made.
This new duty for the superannuation trustees will help protect its individual members by requiring a greater level of accountability and transparency in how the fund is managed and provide an overarching duty to act in the best interest of their members and help to maximise their retirement savings.
For more information on any of the announcements from Federal Budget 2020/21, talk to your adviser or contact the Findex Wealth Management team.
For more Federal Budget coverage and news as it comes to hand, visit ourFederal Budget Resource Centre.