MySuper Bill passes

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MySuper Bill passes

The Federal Government’s low-cost default superannuation product MySuper has passed the House of Representatives, with anti-‘flipping’ measures attached.

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The Federal Government’s low-cost default superannuation product MySuper has passed the House of Representatives, with anti-‘flipping’ measures attached.

MySuper is part of the government’s reform initiatives for the superannuation industry and was a 2010 election commitment.

The Superannuation Legislation Amendment (MySuper Core Provisions) Bill 2011 establishes the core framework for MySuper products, which will replace existing default investment options in superannuation funds from 1 July 2013.

MySuper products will have a common set of features to make it easier for members, employers and other stakeholders to compare performance across MySuper products. According to Minister for Superannuation Bill Shorten, this will put downwards pressure on member fees.

From 1 January 2014, it will be mandatory for employers to make employee contributions to a fund offering a MySuper product. This start date is delayed from the original start date of 1 October 2013, in order to facilitate a smoother transition to the new regime for both employers and superannuation funds.

Anti-‘flipping’ amendments passed
 
The Greens were successful in amending the MySuper Bill to prevent super funds from moving employee’s funds from one MySuper product to another after an employee leaves his/her employment. This process, called ‘flipping’ allowed super funds to move the employee’s funds into higher fee-charging accounts without permission.

Research commissioned by the organisation representing industry superannuation funds, the Industry Super Network, of 13 retail fund ‘families’ found:
  • ‘12 of the 13 fund families exposed members to fee increases via automatic transfer (flipping) when leaving an employer;
  • Using an account balance of $50,000 and $200k TPD cover annual fee increases topped $648 (+73%) per annum;
  • Average fee increases were $292 (+28%) per annum;
  • Fees may increase much more with higher balances given most fee increases flow from increases in asset-based fees.’
The Greens amendment which was passed unopposed means funds will now have to disclose any proposed fund transfer to members and obtaining their written consent at the time.
 
The government also amended the Bill to enable allow different investment mixes, or a life-cycle investment strategy, in MySuper products.
 
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