GREENWOOD:
This week, as July 1 ticked over, a raft of changes to tax and superannuation policy became law. Now when it comes to super the changes come because of the Government's success in guiding through Parliament a significant reform to the accountability of superannuation funds and to the people who run them.
Among the changes, contributions will increase to 10 per cent of a person's pay, that's on the way to 12 per cent of course. A new worker in future will be stapled to a single fund when they start work. This is to prevent multiple funds and therefore multiple fees eroding a person's superannuation account. There's also a new tool via the tax office that lets you look at the performance of default superannuation funds and that's a pretty good guide to see whether your super is on track or not. But to take us through what these changes and more mean, I'm joined by the Minister for Superannuation Senator Jane Hume who's in Melbourne. Senator, many thanks for your time. I mean there is a raft of changes coming through but tell me about the principle of this from the Government's point of view, the changes that have been implemented from July 1, why have you done this, what's the philosophy driving it?
HUME:
So over the last couple of years, Ross, the Morrison Government has been focusing on reducing the inefficiencies in the superannuation system, getting rid of those duplicate accounts that many people have, multiple sets of fees, multiple sets of insurances, lowering fees because we know that Australians pay more in fees on their superannuation than they do in their energy bills. Ensuring that insurances when applied are applied appropriately and people can claim upon them when they need to, and also getting rid of that long tail of under performing superannuation funds which have managed to hide behind the skirts of the good performing funds for so many years. So the Your Future, Your Super legislation that was passed through the Senate just a couple of weeks ago is the next step in that reform process. So those elements combined will save Australians around $17.9 billion into their superannuation over the next decade.
GREENWOOD:
Okay. If I happen to turn up, it's my first day of work, I'm an 18‑year‑old and it happens to be that the fund that I'm put into is a dud, is not a very good fund, then from that point of view as I move through my working life I'm still stapled to a dud fund. So what gives me the ability to move easily and quickly, as I'm not particularly bright, I don't understand the ins and outs of it, to make certain that I'm not adversely effected for a long period of time in an under performing fund?
HUME:
So the Productivity Commission called that the unlucky lottery of superannuation, that if you start your working life in a dud fund and stay in a dud fund throughout your working life it could actually cost your superannuation balance at retirement by about $98,000. The online comparison tool, of course, instantly allows you to check to see whether you're in a dud fund and allows you to move to another one. But most importantly, that performance test means that if you are in a dud fund, your fund has to write to you and tell you that they haven't delivered on their promise and direct you to that online comparison tool so that you can change at any time. The most important thing here though is, Ross, that no one is ever stapled forever to a fund. You always have a choice to leave your fund and to find a fund that better suits you. The reason why you have that choice is because of some reforms that were passed by the Morrison Government about 18 months ago that gave everybody choice of fund and the ability to leave a fund and not be forced into a fund by their employer.
GREENWOOD:
Okay, so I've gone to the Tax Office this week, I've gone to that comparison tool, which is excellent. I will say to people it is a really good site and really worth having a look at. One issue though, a lot of the funds that are the legacy funds, have been around for 20, 30, 40 years, that are under performing significantly, they're not there. It's only the default funds that are there. So if I've got a fund that is a legacy fund, how am I going to find out about that? Or do I then use this tool literally as a comparison to see what I really should be getting in comparison with what I'm getting now?
HUME:
We know that most Australians who default into superannuation default into a My Superannuation product, a My Super product, and they're the ones that will be listed on the comparison tool now. In 12 months' time we're also going to be adding what are called trustee directed products and they're products that have multiple asset classes but the asset allocation is determined by the trustee. Between trustee directed products and My Super products that accounts for around 90 per cent of all inflows into the superannuation system. Yes, there are some legacy products that people have been in for some time. Most of those people have been advised to get into or that are in a platform and they're much harder to measure but we have directed Treasury and APRA, to find a way to measure the performance of those funds and they will come on to the online comparison tool as soon as they possibly can. But right now we want to deal with the majority of people that have been defaulted ‑ the most disengaged in our superannuation system too ‑ who have been defaulted into the system. We want to make sure that those people are starting their superannuation journey in as good a fund as possible.
GREENWOOD:
Just another quick one, that is this week we also saw the Intergenerational Report come out and that effectively said as a result of Coronavirus that the ageing of Australia's population is literally going to be delayed, the issues that occur with that, one of which is retirement savings, health for our aged population. Just explain how that changes the Government's priorities when it comes to superannuation.
HUME:
Well we've always known that we're facing an ageing population and that over time there are more people of retirement age than there are of working age, that the ratios between the two gets smaller and smaller, and of course that means that funding our retired population, particularly there is more pressure on the aged pension, which is really the impetus behind the compulsory superannuation system in the first place.
But I suppose what's most important is that the proportion of people that are on the aged pension will probably continue into the future. We expect that there will always be some people on a full aged pension and some people on a part aged pension. But we want more and more people to have a comfortable retirement and to be self‑sufficient in retirement, which is why we need to make sure that our superannuation system is built not for 30 years ago when it first began but for the next 30 years and beyond there, to make sure that the people that are working today that are retiring in 30 years' time can have the best possible standard of living in retirement. So that's why we're focusing so hard on ensuring that funds perform and that the fees in the superannuation system are pushed down.
GREENWOOD:
Senator Jane Hume, Minister for Superannuation, I appreciate your time on the program today.
JANE HUME:
Great to be with you, Ross.