It has certainly been an eventful year for Australia’s superannuation members, with a bunch of changes taking place, as well as a lot more ups and downs across investment markets.
Here are the top 8 things that happened over the year:
1. Strong performance, but outlook is less rosy
We are forecasting a return of 14.8 per cent for the median balanced option for the 2019 calendar year. But the outlook for most members is unlikely to be this strong in coming years as funds are typically aiming for a return of around 5.5 per cent each year over the longer term.
This is driven by the returns outlook being lower than what we have seen over the past decade due to more subdued expectations in investment markets.
This is a real challenge for retirees, as those investment options with higher exposure to fixed interest and cash have a diminishing return outlook in the current interest rate environment.
2. Accounts transferred to the ATO
Inactive accounts with less than $6,000 have been transferred to ATO in October with more to be sent in April 2020. You can check if you have money sitting within the ATO. This is an outcome of the government’s ‘Protecting Your Super’ (PYS) legislation that came into effect from 1 July 2019.
3. Introduction of a limit on fees for low balance accounts
If you have $6,000 or less in your account at the end of June each year, the total fee you will pay is now capped at 3 per cent per annum to prevent your balance being eroded based on the PYS legislation. Fees in super have been improving with the average total fee on a $50,000 account balance sitting at around 1.2 per cent.
4. Say goodbye to exit fees
If you are unhappy with your existing fund and decide to change to another fund, from 1 July 2019 exit fees were banned based on the PYS legislation so you will no longer need to pay to leave your existing provider.
5. Life insurance cancelled if your account is inactive
Default life insurance will be cancelled if your account is ‘inactive’ which means it hasn’t received a contribution in 16 months unless you opt-in or reactivate your account. Another outcome of the PYS legislation.
6. Insurance removed for young members and those with low balances
From September 2019 new members under the age of 25 will not automatically be given insurance when joining a super fund and members with a balance of $6,000 or less will not have insurance unless they opt in. This was implemented through the government’s ‘Putting Members’ Interests First’ (PMIF) legislation.
7. Regulator getting stronger powers
The super regulator, the Australian Prudential Regulation Authority (APRA), has been given stronger powers to deal with underperforming and sub-scale super funds and will be engaging with funds that it believes should merge or exit the industry. This means we are likely to see less funds in coming years.
8. More data available
APRA has changed the way it is reporting data on funds. It recently launched its Heatmaps for MySuper products. This shows they are putting more pressure on providers to perform and shining a greater spotlight on the industry.
With so much change over the year we encourage members to review their superannuation provider and investigate whether it is fit for them as we approach 2020.
Camille Schmidt is the market insights manager of SuperRatings.
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