The Gillard Government's election commitment to deliver a better deal for superfund members is a step closer following the release of the final details of the Government's Stronger Super reforms.
Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said "A thirty year old worker on full-time average wages can expect up to $40,000 more in retirement when the Gillard Government's Stronger Super reforms are implemented. For such a person this could be broadly equivalent to a 1 percentage point increase in contributions."
The key elements of the Stronger Super reforms are:
- Creating MySuper, a new simple, low cost default superannuation product from 1 July 2013;
- Providing APRA, ASIC and the ATO with the tools they need to improve their oversight of superannuation; and
- Improving the administration and management of super accounts through our SuperStream reforms, making the processing of everyday transactions easier, cheaper and faster for members and employers.
Once fully implemented, these reforms could reduce the fees paid by members by up to 40 per cent.
"It's in the national interest to encourage Australians to save more for their retirement. But it's also fair the superannuation industry contributes to higher retirement savings through greater efficiency and lower fees," Mr Shorten said.
"I'm very pleased to see the great work done by Paul Costello and the consultation panel has resulted in the majority of recommendations being agreed to by the superannuation industry. I would also like to acknowledge the strong contribution from the union movement and ACCI, who have a shared interest in ensuring the super system is as efficient and user-friendly as possible."
Key new elements
Fees
MySuper products will have a single, diversified investment strategy. They will have to be offered at a standard set of fees generally available to all members. However, funds will be able to offer discounted administration fees to employees of particular employers, reflecting the administrative efficiencies for the fund in dealing with the employer. Any discounted fee will be reported to APRA and published by the fund. MySuper public offer funds will be able to be compared on fees.
In addition, funds will be able to offer employers with more than 500 employees a MySuper product tailored to the needs of the particular workplace including the investment strategy, member services and fees. The details of all separately tailored MySuper products will be required to be reported to APRA.
Transition
From 1 October 2013, employers must make contributions for employees, who have not chosen their fund, to a fund offering a MySuper product. All new superannuation payments will be commission free.
By 1 July 2017, funds will need to transfer the existing default balances of members to a MySuper product. This will see the orderly transition of existing billions of retirement savings to a commission‑free environment. However, the Government will consult further on a mechanism to allow for this period to be extended in certain, limited circumstances, recognising there may be instances where existing obligations affect a trustee's ability to transfer balances.
"By 2017 the vast majority of super balances will be commission-free," Mr Shorten said.
Consolidation
The Government will help superannuation funds and their members locate and consolidate multiple member accounts. New processes will see lost and inactive accounts, with balances under $1,000 and in eligible rollover funds, consolidated into the member's current active account, unless the member opts out. This reform will reduce the amount of fees paid on multiple accounts and maximise retirement benefits.
Reporting of contributions
The Government will ensure workers get better information about when their superannuation is being paid. Employers will disclose on payslips when contributions are due to be paid. This will provide an early warning if superannuation entitlements aren't being paid.
The use of e-commerce and data standards will enable money to be allocated to member accounts in a more timely manner and reduce the likelihood of member accounts being lost due to incomplete or incorrect information being provided to funds. The SuperStream working group will continue work on the data and e-commerce standards, with a view to having the proposed contributions and rollovers data standards available in early 2012.
The data and e-commerce standards will be mandated for superannuation funds from 1 July 2013. The Government will extend the data and e-commerce standards to large and medium sized employers from 1 July 2014.
"I'm mindful of the implementation issues this raises for small employers. We'll continue to consult with employer groups on the feasibility of bringing small employers within this framework from 1 July 2015," Mr Shorten said.
Further details on key design issues for Stronger Super can be found in the information pack at http://strongersuper.treasury.gov.au.
The outcomes of the Stronger Super consultation process, chaired by Mr Costello, can be found at http://strongersuper.treasury.gov.au.
Given the breadth of the Stronger Super reforms, legislation will be introduced in several tranches, over the coming months and in the first half of 2012. Consultation with stakeholders will be undertaken on each tranche of legislation.
"I expect the exposure draft legislation on the core elements of MySuper will be released in the next few weeks," Mr Shorten said.