Choice of fund ‘fundamental’ to super system

From

John Maroney

The fundamental right of all employees to have the ability to choose their own superannuation fund should be an integral part of the retirement savings system, SMSF Association CEO John Maroney told a Senate Committee yesterday.

“Giving all employees the option to select their own superannuation fund is an essential element in promoting an efficient and competitive superannuation sector.

“It’s the Association’s understanding that there are many self-managed super fund (SMSF) trustees who are adversely affected by the fact they cannot choose where their Superannuation Guarantee (SG) contributions go, including into their own SMSF.

“A common scenario for many SMSF trustees, of which about 60% are 55 years or older, is to be working in part-time jobs under an enterprise agreement while transitioning to retirement.

“The fact they can be employed under an enterprise agreement that can dictate where their SG contributions go is unfair and inefficient and needs to be changed.”

Maroney told the Senate Committee on Economics Inquiry into the Treasury Laws Amendment (Improving Accountability and Members Outcomes in Superannuation Measures No. 2) Bill 2017 it was not just SMSF members who were affected by lack of choice.

“Arrangements that fail to give employers or employees any choice as to where their SG contributions are made have widespread negative consequences of which the most significant is account proliferation, resulting in multiple sets of fees and insurance premiums that erode superannuation balances.”

In the Association’s appearance before the Senate Inquiry, Maroney also contended that opening up choice of fund to all employees would increase the efficiency of the system by removing the need of employees who were constrained by an enterprise agreement to roll-over their contributions to their fund of choice.

“This is often the case for employees who don’t have unconstrained choice of superannuation fund but wish to control their own superannuation through an SMSF.  They receive contributions from their employer in their default fund and then periodically roll over these amounts to a superannuation fund of their choice.”

Maroney said giving employees their choice of fund, a long-held policy position of the Association, would improve competition in the $2.3 trillion superannuation industry.

“All employees should have the right to enter the fund of their choice, including an SMSF, when starting new employment, and not be forced into a fund because of an enterprise agreement or industry award.

“Overall, our Association is concerned about having the right settings for the broader superannuation system and we see choice of super fund as a key element of an efficient and effective Australian superannuation system.”

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