Bill Shorten extols value of superannuation auto-consolidation
Ignoring questions from the media about a leadership spill, Minister for Superannuation and Financial Services Bill Shorten today in Melbourne basked in the praise of new Financial Services Council (FSC) research into inactive superannuation.
The research confirmed Federal Government claims that its new Stronger Super reforms, including auto-consolidation, will increase the level of efficiency in the superannuation industry.
Minister Shorten said the research had found 6.9 million inactive accounts would be consolidated into members' active accounts after the reforms were introduced on 1 January 2014.
Inactive superannuation accounts with less than $1000 will automatically be rolled over into their owners' active accounts using the member's Tax File number as the unique identifier, the Minister said.
"The reform will reunite many Australians' lost and inactive super - bolstering their super savings and meaning they can enjoy a more secure and independent retirement.
"It will 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."
There are more than 28 million superannuation accounts in a country with a population of 22 million - nearly three accounts for every working Australian. An account is described as 'inactive' if no activity has taken place on the account for two years.
Inactive members will be sent a letter informing them of the automatic consolidation of their accounts before implementation date.
About one million of the 6.9 million inactive accounts have an insurance policy attached, which may present an obstacle to consolidation.
FSC chief executive John Brogden said that members will have "no discretion" over the consolidation, but "no member will be any worse off."
"The automatic consolidation reforms will cost the superannuation industry about $1 billion; however they could possibly result in longer-term savings of $20 billion," he said.
Lost accounts will be subject to different rules. Funds in Lost Super Accounts will automatically flow into the Australian Taxation Office (ATO).
Philip Hogan, managing director Asia Pacific at DST Global Solutions which conducted the research, said the main challenge for the superannuation industry in preparing for auto-consolidation was technology development.
"Common data standards would make auto-consolidation more efficient, as standards will enable funds to communicate effectively with each other and with the ATO," he said.
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