The eligible rollover fund (ERF) sector has experienced significant pressure in fiscal 2011following the government mandated transfer of lost superannuation accounts to the Australian Taxation Office (ATO), according to the findings of an industry review.
As at 30 June 2011, the ATO held more than $730 million in unclaimed superannuation, representing 2.3 million accounts, the SuperRatings 2011 ERF review said
The figure is close to double the $393 million held as at 30 June 2010, cementing the ATO the largest depository of lost super accounts in the sector, and the fourth largest ERF by funds under management (FUM), the review said.
As a result of the ATO's market share, the total number of members in an ERF dropped by 22.6 per cent or 1.39 million over the period, reducing ERF membership to that of 2006 levels.
Despite the plunge in membership numbers, the drop represented a 1 per cent decrease in the level of the sector's FUM; with the majority of members transferring to the ATO only having account balances of less than $200.
However, the transfer of unclaimed accounts to the ATO has significantly changed the outlook for the ERF sector.
"The transfer of 'lost accounts' to the ATO has impacted some ERFs more than others, with one ERF losing 62 per cent of its members and another losing 27 per cent of its FUM," SuperRatings managing director and author of the report, Jeff Bresnahan, said.
"The outlook for ERF's has changed significantly in recent times, and the headwinds will only continue."
Bresnahan said the government's superannuation reforms will significantly simplify the process for funds and members to search for and consolidate accounts through the use of Tax File Numbers (TFNs).
"As part of our analysis, our survey found that approximately half of ERF members have a TFN recorded against their account. When auto-consolidation of accounts begins, expected to be in January 2014, ERFs may see up to half their membership base disappear almost overnight," he said.
He said the auto-consolidation however may be a positive for Australians searching for lost super.
"This has the potential to be a significant driver in the reduction of multiple superannuation accounts within the Australian superannuation system," he said.
"The number of accounts dropped from 30.98 million within APRA [Australian Prudential Regulation Authority] regulated funds, to approximately 28.83 million accounts between June 2010 and June 2011."
The review found around 70 per cent of the change was driven by the reduction in ERF members, with the remaining 30 per cent coming from mainstream superannuation funds.
While the review found there are still around 2.5 accounts for each working Australian, the ratio is expected to continue to decrease over the next two years.
