“New Treasury analysis shows the Government can do more to prevent small accounts being eroded by fees and charges without a member’s awareness,” Minister for Financial Services and Superannuation Bill Shorten said in a statement Monday.
He estimated that there is currently $17 billion sitting in 3.4 million lost accounts in superannuation funds.
To ensure they are property protected from being eroded by fees and charges, the Government plans to increase the account balance threshold when inactive accounts are transferred to the Australian Taxation Office (ATO) from $200 to $2,000.
Also, interest will be paid at a rate equivalent to the consumer price index (CPI) inflation from 1 July 2013 on all lost superannuation accounts once reclaimed from the ATO; the period of inactivity before an account is required to be transferred to the ATO will also be reduced from five years to 12 months.
“The introduction of interest at CPI means that not only will these small lost accounts no longer be eaten up by fees and charges, but they’ll actually retain their value in real terms when they’re re-united with the lost member,” Mr Shorten said.
“These reforms will also help reduce the number of superannuation accounts that have unidentifiable members by reducing the period of time that a super fund can hold the account of an unidentifiable member.
“This will encourage funds to collect sufficient information to identify members during the period when contributions are being made,” he said.
The new reforms are estimated to improve the budget position by $675.2 million over the forward estimates period. The ATO will receive $62.8 million over the forward estimates to implement these changes. The body will also administer $37.0 million in interest payments associated with reclaimed funds.
The Government will implement a recommendation from the Super System Review (Cooper review) and repeal the member protection regulations from 1 July 2013.
In the statement Mr Shorten also announced the Government has agreed to a 6-month transition period for the industry to comply to SuperStream reform to lower operating costs.
“The Government remains committed to mandating electronic contributions from medium and large employers from 1 July 2014. As such, the transition-in period for rollovers will end on 1 January 2014, so that the industry can prepare itself to receive contributions electronically for employers,” Mr Shorten said.
The Government has announced membership of the SuperStream Advisory Council, chaired by Retail Employees Superannuation Trust (REST) chief executive Damian Hill, to get external scrutiny of SuperStream implementation.
The key responsibilities of the Council include leading the adoption of the SuperStream reforms, setting measures of success and reporting to Government.
The Government also plans to reduce the superannuation supervisory levy by $38.2 million over the next six years starting with a 10.4 per cent reduction in 2013-14, Mr Shorten said.
Implementation of reforms to the levy paid by self-managed superannuation funds (SMSFs) will be increased from $191 to $259 per year from 2013-14.
Lastly, the Government will amend the law to allow the pension earnings tax exemption to continue following the death of a pension recipient until the deceased member’s benefits have been paid out of the fund in response to concerns of uncertainty.
