New super laws that trap Australians in dud super products could cost millions of workers almost $230,000 from their retirement savings – unless the Senate acts today to fix the flawed Bill.
The government’s Your Future, Your Super legislation staples millions of members into dud products that would either fail new performance tests or are shielded from them altogether.
The Senate must act to protect members financial interests by mandating workers can not be stapled to a fund that has not passed a performance test. Unchanged this Bill could cost Australian workers $230,0001 from their retirement.
At least 2.6 million super fund accounts could be locked in funds that would fail performance tests – many of these people will end up stapled to these duds for decades unless the Senate fixes the Bill. Others in dangerous jobs could be lumped with inappropriate insurance.
ISA supports the Bill’s intention to remove unintended multiple accounts from the system – but the fix should not be to keep millions locked into underperforming products – leaving them far worse off.
A further flaw in the legislation is that more than $500 billion of members savings will also be shielded from performance tests – including products that were savaged during the Banking Royal Commission.
Funds that fail the test are forced to write to members informing them of their underperformance, the consequence for consecutive failure is new members are barred from joining. Disengaged members that do not act on the letters will stay trapped in the inferior product having their savings drained.
There is also no timeframe locked in law to expand the test into the for-profit fund dominated Choice sector. The Productivity Commission found the Choice sector was littered with high fee charging duds.
ISA supports the Senate pursuing amendments in members best interest that includes:
- Expanding performance tests to include all fees and products;
- Mandating members can only be stapled to super funds that pass the performance test;
- Ensuring the Best Financial Interest duties also applies to the up to $10 billion a year profit creamed off the top of members’ savings.