Engage with your super
The royal commission’s final report will be looked upon as a key fork in the road for the super industry. It highlights clear issues that have developed over numerous years and emphasises the importance of addressing them.
The commission has clearly shown the cost for consumers of not being engaged with their super. For many Australians, this disengagement may already have had some impact on their retirement (through poor returns, high fees, duplicate accounts or insurance), so getting involved now is better than waiting to see what the future may bring.
Duplicate accounts have contributed to the erosion of super balances over time, with a new account being created each time you change jobs, if you don’t provide your new employer with your existing super details. The report recommends that all Australians have one super account for life, which would prevent further creation of unnecessary accounts that eat away at your retirement nest egg.
There are also a number of recommendations to support better protection of consumers when making decisions about their superannuation, with proposed changes to financial advice, insurance and selling practices. In particular, any existing commission payments (“grandfathered commissions”) to advisers from super accounts are proposed to cease by January 1, 2021.
A major issue that came out of the royal commission was members being charged for advice they either weren’t aware of or weren’t accessing, such as fees for no service.
People who do not choose their super fund are defaulted into a low-cost, no-frills MySuper account. A major proposal is a ban on the deduction of any advice fees from MySuper accounts (except for intra-fund advice).
As well, there is a set of conditions that would have to be met for a fund to be able to charge you ongoing fees for advice if you are in a “choice” account (if you have chosen your fund). These include limitations on the types of investments the advice could relate to and written consent to the charges on an annual basis.
A prohibition on all forms of unsolicited offering of super products is also proposed. It would mean a fund would not be able to contact you without your express consent that you were interested in hearing about the super account it has on offer. Given the complex nature of superannuation, this would be beneficial for consumers and ensure that when they enter into an arrangement they are prepared to have the discussion.
All in all, with an election due later in the year, the path toward implementing these changes will take time to become clear. But we see the report as a step in the right direction, to support better outcomes for Australians.
In saying that, we all have a part to play too. All Australians need to listen up and pay attention as the decisions that they make now regarding their superannuation will affect them later in life.
Our advice is to engage with your super and spend time understanding the fund that you are in, as well as the advice and insurance services that go along with it.