Big changes are coming for Australian superannuation, affecting both employers and their employees. From 1 November 2021 when a person moves from one job to another, their super fund will be ‘stapled’ to them.
This new reform, part of the governments ‘Your Future, Your Super’ measure announced in the 20/21 Federal budget, will give employees more transparency over their choice of super fund, rather than being opted into an employer’s preferred default super fund, sometimes resulting in employees having many, unmaintained funds.
This change could also mean Australians save a significant amount of money in unnecessary fees and insurance premiums from having multiple funds, with the Treasury estimating this will save workers $2.8 billion in these costs by 2031.
By stapling super funds, employees, especially younger ones just starting employment who may often not invest time into looking closely at their super funds or choices, can choose a super fund and stick with it as they change jobs, until they are ready to move.
In the case where an employee already has multiple funds against them, the ATO will determine the stapled super fund based on a number of factors including the eligibility of the fund, how recently each fund was created and contributed to, the balances of each fund and whether or not a fund has already been identified as a stapled super fund for that employee.
Payroll officers will be able to request the stapled fund of a new employee from the ATO and that fund will be the default choice for that employee, unless they choose to change it. Further automation of this process is likely toward the end of next year.
In late August, APRA (Australian Prudential Regulation Authority) released the lists of highest and lowest performing super funds, comparing them over 7 years of performance. Naming these funds is another Your Future, Your Super initiative, which will also require underperforming funds to tell their investors that they have been underperforming and refer them to a tool to review their fund choice.
With such changes afoot, now may be an optimal time for employees to review their superannuation arrangements.