The Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan, today announced that regulations to give effect to the Government’s portability of superannuation policy have been gazetted.
“The Government believes that Australians should have the freedom to move their superannuation benefits from one fund to another. This is about allowing Australians to take charge of their own superannuation savings,” Senator Coonan said.
"A sense of ownership is vitally important to encouraging people to think about their superannuation and plan for retirement. Portability is an important step forward in that process, " Senator Coonan said.
With limited exceptions, portability will give members the right to transfer benefits from their current superannuation fund to a fund of their choice. It will allow members to consolidate their superannuation benefits in one account to limit exposure to fees and charges or to diversify their superannuation portfolio.
“The existence of hurdles preventing portability of superannuation savings has led to funds holding more than $7 billion for owners that cannot be contacted, and to more than 2.5 accounts existing for every Australian worker. Consolidating accounts can reduce fees and lead to better retirement incomes,” Senator Coonan said.
“The ability to consolidate multiple accounts will also potentially result in a reduction in the amount of fees and charges being paid by fund members thus improving the retirement incomes of Australians.”
In designing the policy, the Government conducted an extensive consultation process, releasing a discussion paper on 19 September 2002 and draft regulations on 27 May 2003.
“The Government took note of the concerns raised by the industry through this process and the final regulations reflect that consultative approach. For example, to address industry concerns about the potential for churning of accounts, the final regulations only require a fund to give effect to one request to transfer per member per year,” Senator Coonan said.
The regulations will take effect from 1 July 2004. A copy of the regulations will shortly be available at http://scaleplus.law.gov.au. A summary of the main features of the regulations is attached.
MAIN FEATURES OF PORTABILITY
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Portability will apply to:
- accumulation funds; and
- fully funded defined benefit funds where the member has ceased employment with the employer sponsor of the fund.
- Portability will not apply to:
- Unfunded public sector superannuation schemes; and
- Self-managed superannuation funds; and
- Benefits being paid as a pension (other than an allocated pension).
- Commencement. Portability will commence on 1 July 2004.
- Timing of transfers. Funds will be required to roll-over or transfer a benefit as soon as practicable but in any case within 90 days of the request.
- Frequency of transfers. Funds will only be required to affect one transfer per year for each member of the fund, though they will be free to offer more regular transfers if they wish.
- Partial transfers. If a member of a superannuation fund wishes to make a partial transfer (less than their entire withdrawal benefit), the trustee can require the member to leave a balance of up to $5,000 behind in the fund. This limits costs to funds from managing small accounts.
- Disclosure. The portability regulations require that, prior to making a transfer, the trustee is satisfied that the member is aware of their right to receive information on the effect of the transfer (eg. impact of fees or insurance cover) and is satisfied that the member does not require such information. This will ensure members are informed of their right to information but will not unnecessarily delay a transfer.
- Role of APRA. APRA will have the power to freeze or alter a fund’s
ability to provide portability if it believes there may be an adverse financial
impact on the fund. Trustees will be able to apply to APRA to exercise this
power.