- Q: Why has the government introduced MySuper?
- Q: What happens under MySuper?
- Q: What does MySuper mean for your super account?
- Q: What if I have an SMSF, or I don’t want to move to a MySuper fund?
- Q: How do I know that my super fund is a MySuper fund?
- Q: What fees can a MySuper fund charge?
- Q: What about my life insurance cover?
- Q: Does my super pension move to a MySuper super fund?
If you believed the federal government’s public relations campaign, MySuper should have delivered you the equivalent of nirvana in superannuation – low fees, strong investment performance, financial security and a worry-free retirement.
Pardon? You didn’t see the government’s MySuper publicity campaign? I am not surprised because there was not one skerrick of official, public information designed for consumers explaining what MySuper means for individual fund members.
Did you know that since 1 January 2014, your employer’s super contributions may have been going to a new super fund, known as a MySuper product? Did you know that you may have ended up with one super fund holding your super balance accumulated up to the end of December 2013, and another super fund holding your super savings accumulated from January 2014? And since July 2017, those 2 super accounts may then have been combined into the MySuper product?
Continue reading to find out what happened to the super accounts of Australian consumers since July 2017, and what has been happening for the past 4 years.
‘What is MySuper?’, you may ask. A good question since the federal government and the super fund industry talked to themselves for several years about MySuper, and, until recently, had largely forgotten to mention this major change to fund members – you know, us; consumers – the sole reason the superannuation industry exists. More recently, your super fund may have provided you with some explanatory material.
Also, during the implementation phase, I don’t believe the federal government fully informed the hundreds of thousands of employers who were required to change payroll systems and pay super contributions into MySuper super funds (for those employees who had not actively chosen their own super funds), rather than paying those contributions into the hundreds of existing super funds currently receiving super contributions.
Listed below are some of the questions (and answers) that SuperGuide has received, or assume consumers are asking about the introduction of MySuper, and the introduction of new super products.
- Why has the government introduced MySuper?
- What happens under MySuper?
- What does MySuper mean for your super account?
- What if I have an SMSF, or I don’t want to move to a MySuper fund?
- How do I know that my super fund is a MySuper fund?
- What fees can a MySuper fund charge?
- What about my life insurance cover?
- Does my super pension move to a MySuper fund?
Note: For a list of all MySuper products available in Australia, see SuperGuide article MySuper: 109 super funds now available.
Q: Why has the government introduced MySuper?
Answer: In short, the Government’s intention was to “create a new simple, low cost default superannuation product called MySuper”, which has now replaced the super funds of around 80% of all fund members. According to the Government’s Stronger Super website, effective since 1 July 2013, super funds can offer “a simple, low cost default superannuation product called MySuper to improve the simplicity, transparency and comparability of default superannuation products.”
Note: The federal government reports that the majority of Australians do not make an active choice about where their super money is placed, nor in what way that money is invested, which means most super money is held in default super funds, and invested in default investment options. Although most Australians do have the right to choose their own super fund (about 30% don’t have a choice), around 80% of those who can choose their own super fund, leave it to their employers, or their union, to make the decision for them.
Q: What happens under MySuper?
Answer: The significant news is that since January 2014, your employer’s super contributions have gone to a new super fund (a MySuper super fund), while your old super account may have continued to exist until 30 June 2017, which potentially meant two sets of fees, and a lot of confusion among fund members. Your super fund as at January 2014, may have transformed into a MySuper fund, negating the need to transfer your member benefits to a new MySuper fund.
Effective since January 2014, only superannuation funds that met the MySuper standards have been able to accept compulsory employer contributions (Superannuation Guarantee) for those Australians who have not chosen their super fund.
Since January 2014 until 30 June 2017, your existing super account may have continued to operate while your employer made super contributions to a new super fund. At the risk of repeating information, note that in some cases, your pre-January 2014 super fund may have transformed into a MySuper fund, which meant your employer’s super contributions continued to be paid into your existing super account, rather than a new account in a new super fund.
Since 1 July 2017, your super balance in your old (existing) account (if your super fund was not transformed into a MySuper fund) MUST have been moved to the MySuper product that started taking your employer’s super contributions in January 2014.
Confused? I don’t blame you.
Q: What does MySuper mean for your super account?
Answer: According to the federal Government, MySuper products deliver a simple set of product features, irrespective of who provides them, including a single diversified investment option. This enables members, employers and market analysts to compare funds more easily based on a few key differences. It is also designed to minimise the chances of fund members paying for any unnecessary ‘bells and whistles’ they do not need or use.
APRA, the superannuation regulator, now publishes fee and performance data for all MySuper funds, which hopefully will enable fund members to easily compare their super fund against the other super funds.
The inference from the introduction of this new low-cost product is that super funds were too expensive, too complex and an overall mystery to Australians. Well, a lot of that inference is probably true but many current superannuation funds now satisfy the MySuper requirements.
All existing superannuation funds were able to apply to offer a MySuper product (and many did), and MySuper products replace existing default superannuation funds. What this means for Australian consumers who are fund members of the largest super funds in Australia is that their current super fund morphed into a MySuper super fund and you then continued on ‘as normal’.
Super alert! The only potential complication to this statement is where you may not have chosen your super fund, but you have actively chosen specific investment options within that super fund, or you have actively chosen an investment option for part of your super balance. As I understand the MySuper rules, since 1 January 2014, your new employer super contributions have still moved to a MySuper fund, but your super balance in your old account did not have to be moved across to the MySuper fund from 1 July 2017, because you have made some type of active choice with your existing super account, albeit investment choice. In such circumstances, you will continue to have 2 super fund accounts until you actively rollover one of your super account balances.
Important: If your super fund is decided via an industrial award or workplace agreement, then your employer’s compulsory super contributions must also be paid to a MySuper fund, effective since January 2014. Fair Work Australia has reviewed the default superannuation funds included in industrial awards and agreements to ensure that they offer a MySuper product.
Q: What if I have an SMSF, or I don’t want to move to a MySuper fund?
Answer: MySuper only replaces existing default products, where Australians have NOT made an active choice of super fund. Even where you have not made an active choice as of today, you can still make an active decision to choose a super fund, other than a MySuper fund.
If your employer’s super contributions are being paid to a self-managed super fund, then this arrangement is not affected by the MySuper rules because you are not considered a ‘default fund’ member.
Q: How do I know that my super fund is a MySuper fund?
Answer: Super fund trustees offering a MySuper product must hold a specific MySuper licence issued by APRA. The first MySuper licence was issued on 14 February 2013, and you can find a list of all MySuper funds in the SuperGuide article MySuper: 109 super funds now available.
Q: What fees can a MySuper fund charge?
Answer: A MySuper super fund can only charge the types of fees listed in the bullets below, and the fees also have to be described using these terms to enable comparison with other super funds:
- administration fee
- investment fee (including a restricted performance-based fee)
- buy and sell spreads (limited to cost recovery)
- exit fee (limited to cost recovery)
- switching fee (limited to cost recovery)
- member-specific costs, such as account splitting as a result of a family law decision.
Superannuation funds that are not MySuper products, such as those super funds that may still hold your accumulated super balance (pre-January 2014 balance), can also choose to charge other fees. For more information on the types of super fees that can be charged, see SuperGuide article Comparing super funds: 10 fees and charges you need to know about.
Q: What about my life insurance cover?
Answer: If you have an accumulated super balance with accompanying insurance cover, you may not also want insurance cover in your new MySuper account. Trustees of a MySuper fund must allow members to opt-out of life and TPD insurance within 90 days of the member joining a fund, or on each anniversary of the member joining the fund. If MySuper trustees are unable to obtain opt-out cover at a reasonable cost, trustees of MySuper products must offer compulsory insurance.
Before you do opt out of life insurance, check the insurance cover that you have in both super funds to ensure you are comparing like with like. If your existing super fund has transformed into a MySuper product, then you may not have to make any changes to your insurance cover. For more information on life insurance, see SuperGuide article Life insurance and super: 10 facts you should know.
Q: Does my super pension move to a MySuper super fund?
Answer: At this stage, MySuper super funds are not providing super pensions, which means, your employer super contributions may be going to a different super provider, than where your superannuation pension is held. If you have made an active choice about where your employer’s super contributions should be paid, then your super money should not have been moved to a MySuper product.