Australians are set to benefit from significant savings in superannuation as 6.9 million inactive superannuation accounts are reunited with their owners, according to research by the Financial Services Council and investment management technology provider DST Global Solutions.
The research, released today by Minister for Financial Services and Superannuation the Hon Bill Shorten MP, looked at a key change under the Government's 'Stronger Super' reforms where inactive superannuation accounts with less than $1,000 will automatically roll over into their owners' active accounts.
It found 6.9 million accounts, or a quarter of all accounts, would be consolidated into active accounts after the reform commenced on 1 January 2014.
"This reform will reunite many Australians with lost and inactive super - bolstering their super savings and meaning they can enjoy a more secure and independent retirement," the Minister said.
"It will also reduce the red tape burden on the industry and mean lower fees for account holders, leaving them with more money to invest in their nest egg," the Minister said.
John Brogden, CEO of the Financial Services Council, said this considerable reduction in the number of accounts would significantly improve the efficiency of Australia's superannuation system and lead to lower fees for consumers.
"There are 28 million superannuation accounts - nearly three for every working Australian. Many people have forgotten they have small amounts of money in super accounts from jobs they had years ago," Mr Brogden said.
"The automatic consolidation of inactive superannuation accounts will make the system more efficient and reduce overhead costs for superannuation funds. This is a big win for consumers as not only will it reunite people with their super, it will help drive superannuation fees lower."
Philip Hogan, Managing Director, Asia Pacific at DST Global Solutions, said while the findings reflected positively on the Government's efforts to make superannuation more efficient, the industry had a lot of work to do to prepare for the changes.
"The main challenge for the superannuation industry in preparing for auto-consolidation relates to development and implementation of technology, as data aggregation will be the linchpin to achieving efficiency," Mr Hogan said.
"Respondents were unanimous that common data standards would make auto-consolidation more efficient, as standards will enable funds to communicate effectively with each other and with third parties, including the Australian Tax Office.
"Overall the removal of small accounts will deliver significant scale and efficiency benefits, which will ultimately benefit superannuation fund members."
Mr Brogden said the removal of a quarter of all superannuation accounts from the system underscored the appropriateness of the Government's auto-consolidation reform.
MELBOURNE
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About the Financial Services Council
The Financial Services Council represents Australia's retail and wholesale funds management businesses, superannuation funds, life insurers and financial advisory networks. The Council has over 130 members who are responsible for investing more than $1.8 trillion on behalf of 11 million Australians. The pool of funds under management is larger than Australia's GDP and the capitalisation of the Australian Stock Exchange and is the fourth largest pool of managed funds in the world. The Financial Services Council promotes best practice for the financial services industry by setting mandatory Standards for its members and providing Guidance Notes to assist in operational efficiency.
About DST Global Solutions
DST Global Solutions is an international leader in technology and services for the investment management industry. With over 25 years of experience in Australia, the company has more than 40 clients in the region including some of the world's largest asset managers and custodians. DST Global Solutions employs over 200 staff in Australia and its locally developed technologies include the market-leading fund accounting solution, HiPortfolio®, and the superannuation and wealth management administration system, Bluedoor®. The company's new middle-office analytics suite, Anova®, is a global operating platform that aggregates, analyses and reports company-wide investment data. Internationally, the company operates in 13 offices serving over 400 clients in 45 countries. For more information about DST Global Solutions, visit: www.dstglobalsolutions.com.