On 6 October 2020, Treasurer Josh Frydenberg handed down the 2020 Federal Budget, which contained a package of significant superannuation reforms. The primary superannuation measures in the Budget are captured in the "Your Future, Your Super" package.
The package is intended to address ‘structural flaws’ in the superannuation system. The reforms will apply from 1 July 2021, and the Government estimates the measures will result in savings to members of $17.9 billion over the next decade. The key reforms in this package are set out below and more detailed information can be found here and here.
1. Existing Superannuation accounts to be “stapled” to members
Significantly, the Government will implement the Royal Commission’s ‘stapling’ recommendation, where an employee takes their existing superannuation account with them when they change employment, instead of being defaulted into an employer’s nominated fund, stopping the creation of multiple unintended accounts.
Employers will obtain information about the employee’s existing superannuation fund from the ATO. If an employee does not have an existing super account and does not nominate a fund, the employer will pay the employee’s superannuation into their default superannuation fund.
Proposed future enhancements will enable digital software developers to build systems to simplify the process of selecting a superannuation product for both employees and employers through automated provision of information to employers.
2. Introduction of an ATO administered ‘Your Super comparison tool’
From 1 July 2021, the new ‘Your Super comparison tool’ will, on a quarterly basis, rank MySuper products by fees and investment returns, as well as clearly marking underperforming products as underperforming. The tool will also link members to super fund websites as well as showing members their current super accounts and prompting them to consolidate multiple accounts, facilitating greater and well-informed member engagement.
The tool will be administered by the ATO and will be 'based on information that superannuation funds report to APRA and will be developed in consultation with the Treasury'.
3. Annual objective performance benchmarking
From 1 July 2021, APRA will conduct benchmarking tests on the net investment performance of MySuper products, with products that have underperformed over two consecutive annual tests prohibited from receiving new members until a further annual test that shows they are no longer underperforming. Funds will be required to inform members about their underperformance. The test will be based on the methodology adopted by the Productivity Commission and further refined by APRA using its 'heatmap' analysis.
Non-MySuper accumulation products, where the decisions of the trustee determine member outcomes, will then be added from 1 July 2022. The funding for this initiative will be met through an increase in levies on regulated financial institutions.
4. Improved transparency and accountability
The new package aims to strengthen obligations on superannuation trustees to ensure their actions are consistent with members’ retirement savings being maximised, with the Government to legislate 'to compel superannuation trustees to act in the best financial interests of their members'.
The Government is also ensuring that super funds are more transparent by ensuring key information is provided to members ahead of Annual Members’ Meetings. The required information will include the member's most recent periodic statement, a summary of all significant event notices sent in the last financial year and information about a range of payments (eg political donations) and related party transactions.