• wblogo
  • wblogo
  • wblogo

Australian Government to reunite consumers with their lost and forgotten pensions

Chris Hamblin, Editor, London, 16 December 2019

articleimage

The Morrison Coalition Government of Australia is framing legislation to facilitate the exit of eligible rollover funds (ERFs) from the financial services industry by 30 June 2021 and proposes to allow the Australian Taxation Office (ATO) to reunite the amounts that it receives from ERFs with their rightful owners sooner.

These policies are part of the Government's drive to tackle unnecessary duplicate accounts in the superannuation system and to lower fees and charges.

ERFs are required to transfer inactive low-balance accounts to the ATO but are unable to transfer other amounts (which presumably include high-balance accounts, which are of interest to HNWs) to the ATO voluntarily and this hampers them in their efforts to exit the market.

The Government will therefore introduce legislation in Parliament early next year to permit ERF trustees to transfer any amounts they like to the ATO voluntarily. The legislation will also require them to transfer all accounts below A$6,000 by 30 June 2020 and to transfer any remaining accounts still residing in an ERF to the ATO by 30 June 2021.

The Government’s efforts in this are have already resulted in the ATO proactively reuniting more than 2.13 million accounts (worth around A$2.79 billion) with their rightful owners. This has prevented consumers from having to pay multiple sets of fees.

Meanwhile, the regulators have discovered that low-balance accounts are most affected by administrative fees, while high-balance accounts are most affected by percentage-based fees. These revelations come from the Australian Prudential Regulation Authority's recently-publicised 'heatmap' which assesses the performance of every MySuper superannuation product.

APRA Deputy Chair Helen Rowell told the press: “We directly contacted the trustees of the worst performing products and asked them to provide or update action plans outlining how they will address identified weaknesses. If they are unable to make substantial improvements in good time, we will consider other options, including pressuring them to consider a merger or exit the industry. We expect all trustees to use the heatmap to reflect on the drivers of their current performance and identify where they can do better.”

APRA has also gleaned three other insights from the data:

  • results for members vary widely and underperformance is evident in all industry sectors and investment risk profiles;
  • higher fees are generally correlated with lower net returns, although there are exceptions; and
  • "more single strategy products outperform the investment benchmarks than lifecycle product stages."

Latest Comment and Analysis

Latest News

Award Winners

Most Read

More Stories

Latest Poll