What’s in the 2020 Federal Budget for super and pension members? Our super and investment experts discuss the proposed changes.
Remember, the changes below are just proposals, until they pass through the Federal Parliament. If and when that happens, most of these measures will come into effect on 1 July 2021.
Your Future, Your Super reform package
It’s been a year of reforms, recommendations and royal commissions. The super industry too has been on a path of reforms and this package continues this trajectory. Positioned as a way to reduce ‘wastage’ in the system, it contains four key measures.
- Your super account will be ‘stapled’ to you as you change jobs. Your new employer will have to pay your super into your existing super account, if you have one, rather than automatically create a new one—unless you choose a different super fund. A new account can only be created, if you don’t have a super account and don’t nominate a fund.
This measure is aimed at reducing the number of duplicate accounts and the doubling up of fees. However, more detail is needed and there may be unintended consequences that need to be addressed. As always, the super arrangement that best suits any individual’s circumstances may not be what happens by default, and default arrangements don’t replace taking an active interest in your super.
- The government has committed to launching a ‘YourSuper’ comparison tool to help super members decide which super fund best meets their needs. The tool will compare MySuper arrangements ranked on fees and investments, provide links to fund websites, as well as prompt you to consider consolidating.
Again, we are yet to see any detail on how the ranking or comparisons will be prepared or what basis will be used. The information may not take into account special arrangements, such as employer fee discounts, bespoke insurance arrangements or additional members services.
- MySuper products will be subject to an annual ‘performance’ test, with funds deemed to be underperforming having to inform its members of such underperformance by the following October. Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members unless their performance improves.
- The Government plans to further increase the accountability and transparency of super trustees. This will include the publication of additional information by trustees.
Superannuation Guarantee (SG) increases to continue as planned
As you may know, the SG rate is on track to increase by 0.5% of ordinary time earnings each year over the next five years, culminating in 12% by 1 July 2025. Although there was some talk of reviewing this arrangement, there was no announcement made as a part of this budget.
Are you a pensioner?
While the budget proposed more tax-free payments to pensioners, there were no special pension-related proposals.
What our experts say
Keen to get more a more detailed analysis? Our super experts have further information on the above proposals, as well as on others, such as the revisions made to the start dates of a number of previously announced measures, and on the provision of additional funding to address serious and organised crime in the tax and super system.
If you’re a super investor looking for economic and fiscal commentary, and the implications for portfolios, our investment strategists have provided a useful summary. In it, they address the COVID-19-related assumptions made by the government, policy initiatives adapted to help recover the economy, concerns about the strength of the consumer, the unemployment rate and what to expect from the Reserve Bank of Australia.
We’re here to help
It’s too early to know what all these proposals would mean for you and we’ll update you if anything of significant impact does happen, if and when these proposals pass through the Federal Parliament. In the meantime, if have any questions, you can call us on 1800 555 667, email us or, if you prefer, we can call you.