The Treasurer handed down a big-spending Federal Budget that looks to give the economy a much-needed boost after it was knocked into a recession by the Covid-19 pandemic. The main focus appears to be on stimulus and job creation, and we hope many Equip employers and members benefit from these measures.
There were a number of significant superannuation reforms announced, but no mention of the recently completed Retirement Income Review.
Although there had been speculation that the gradual increase in the Superannuation Guarantee contribution rate would be put on hold, there were no such announcements in the Budget. Under the legislation currently in place, the SG rate will increase from 9.5% to 10% in the 2021-22 year and progressively work its way to 12% by 2025-26.
The biggest highlights relating to super, dubbed by the Government as Your Future, Your Super, included:
1. a new super comparison tool called YourSuper;
2. default super changes over the next 4 years;
3. an annual assessment of each Fund by the regulator; and
4. greater transparency and accountability.
Each of these had a number of parts, but in summary, they will look to improve the efficiency of the system by reducing duplicate accounts/fees and ultimately forcing more mergers, following pressure on under-performing funds.
Default super changes
Stapling – Members will have their super accounts move with them to their next employer. Employers will need to look-up and remit to the existing super account of their new starters, unless the employee chooses a different fund. The Government is hoping to have this look-up process automated by mid-2022, with payroll systems referring to an ATO register.
People entering the workforce for the first time will select their super fund/MySuper product with the help of the new ATO-provided YourSuper online comparison tool (available from 1 July 2021), or otherwise be sent to the employer’s default fund.
Annual assessment of fund performance
From 1 July 2021 an annual assessment of MySuper products will expand upon the current APRA heatmaps and Member Outcomes test. The assessment will be extended to a broader range of accumulation offerings from 1 July 2022.
Features of this test will include:
- investment returns assessments (e.g. over 7 years at inception and then over 8 years thereafter);
- offerings missing their benchmark by 0.5% or more will be labelled underperforming (on this assessment and on the new YourSuper online comparison tool);
- MySuper products that are labelled underperforming two years in a row will no longer be allowed to receive new default members until they are deemed to have stopped underperforming on an annual test; and
- underperforming funds will need to inform their members of this by 1 October each year (starting from next year) and advise them of the YourSuper online comparison tool.
Increased transparency & accountability
There will be additional disclosure requirements ahead of annual member meetings and stricter requirements will be put in place to ensure super fund expenditure is in the best financial interests of members.
More details will be provided as they are supplied by the Government and gradually become law.
For more information, please reach out to your Relationship Manager or read the Federal Budget Update on our website.