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With more than one million super fund members in underperforming funds now having received notification from their fund, the Australian Institute of Superannuation Trustees (AIST) is urging members to take the time to understand their options.
AIST’s General Manager of Advocacy, Melissa Birks said many members were disengaged with their super and might not read the notification they receive from their fund.
“We are particularly concerned abut vulnerable members who may not be in a position to act on the information provided,” Ms Birks said.
Ms Birks said there were important considerations for members of these underperforming funds, including that – from next month (1 November) - members will be stapled to their fund when they changed jobs unless they nominate a different fund.
“Under the previous system, most people who changed jobs and didn’t nominate a fund were automatically defaulted into a fund, which on average, was a high performing fund,” Ms Birks explained. “But as of 1 November, these people will be stapled to their existing fund, regardless of whether it is a strong or poor performer.”
These new super rules – part of the Your Future Your Super reforms – follow the release on 31 August of performance testing of MySuper products and the earlier ATO launch of a new comparison tool for the same products.
The new performance test saw 13 MySuper products covering more than one million members classified by the regulator as underperforming. These funds were given 28 days – until 27 September - to notify their members of the result.
Ms Birks said in deciding what to do next, members should make use of the ATO’s Your Super comparison tool which considers fees and shows net returns. Additionally, members should carefully consider their insurance needs, as switching funds causes insurance with their existing fund to cease.
AIST remains concerned that the reforms do not treat every fund member equally because only MySuper products are assessed in the first year.
“While MySuper members will have access to information about their fund’s performance, there are thousands of super products that haven’t be tested or included in the comparison tool,” Ms Birks said.
“This leaves a large group of Australians potentially stapled to a dud fund when they change jobs after 1 November. Unfortunately, it’s likely that this will happen to many, many Australians and will have a detrimental impact on their retirement savings."