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Major changes in superannuation policies have taken effect this 2021, including a very recent development concerning employees who change jobs.

If you are unaware or not updated, here is a recap of the major changes affecting superannuation:

1.  An increase in the Super Guarantee rate

The Super Guarantee (SG) rate dictates how much employers contribute to their employee’s superannuation account as a percentage of their wage.  Instead of the previous 9.5%, the SG was raised to 10% effective last 1 July 2021.

2.  Your super is ‘stapled’ to you even if you change employers

People changing super accounts as they change jobs is a common occurrence in Australia.

According to 2020 data from the Australian Taxation Office (ATO), around 4 million Australians held two or more super accounts.  For many, this involves a duplication of the administration charges across multiple super accounts. 

This is why employers are required by law to ask new employees whether they want to maintain their existing super account or join the employer’s default super fund.

However, it appears that even with this requirement, a lot of people still do not use the Standard Choice form, which is supposed to notify their new employer of their decision regarding their super account.  Because of this, employers end up opening super accounts for new employees with their own super fund.

So, if a person changes jobs several times, they could end up accumulating multiple super accounts with small balances (being eroded by administration charges).

As of 1 November 2021, this has changed. The so-called ‘stapling’ of super means employees keep their existing super fund even when changing jobs.

Due to this change, employers are now required to check with the ATO if their new employee already has an existing super fund. Unless their employee requests otherwise, the employer would have to direct payments to their existing super fund.

However, new employees still have the option to use the Standard Choice form to notify their employer about their super fund preferences.  In cases where a new employee has no existing super account, the employer can then open an account for them with the employer’s nominated default super fund.

3.  You will know more about how your super savings are being invested

Another major super reform requires super fund administrators or trustees to provide important details about how they manage funds and make their investment decisions.  They also need to demonstrate how their choices are made in the best interests of their members.

4.  Superannuation funds need to pass an annual performance test

Aside from increasing transparency in the investment of super funds, superannuation products will also be subjected to annual performance tests, with the results being published in the YourSuper tool launched last 1 July 2021 on the ATO website.

Funds that do not pass two tests in succession, or continually underperform, are barred from taking on new members.

This change is meant to ensure super fund trustees always invest funds wisely and act for the maximum benefit of their members.  Members who wish to view how well (or badly) their super funds are performing can check via the YourSuper tool.

What these changes mean for you

The super reforms introduced this year are, of course, meant to benefit super accountholders.

In summary, these changes include:

•      increasing the SG

•      stapling of super accounts while still giving people the freedom to choose their super fund

•      greater transparency in the way funds are managed and invested

•      subjecting super funds to tests, with all information publicly accessible on the ATO website

These reforms are designed to get individuals more involved in and responsible for their retirement savings.

Dominic Cantone
Dominic Cantone Partner
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