Your future now stapled to your super

1 November 2021 may be the perfect time to consider whether your current super fund is the best for you, as this is the date on which the ‘stapling’ provisions of the recently passed Your Future, Your Super (YFYS) legislation take effect.

This will have no impact on the performance of your fund or the fees it charges, but it will mean that, unless you choose otherwise, your existing fund will stay with you for the rest of your working life.

How does stapling work?

Under YFYS, the superannuation account into which your employer contributions are currently paid will be ‘stapled’ to you. If and when you change jobs your new employer will pay super contributions into your existing fund.

For many, this will be a good thing. At 30 June 2020, Australian Taxation Office (ATO) data showed that 26% of Australians had two or more super accounts, mostly accumulated through defaulting into different employer-nominated default funds as they changed jobs. This ultimately reduces your retirement savings through paying fees and costs to multiple super funds.

If you’re a new entrant to the workforce, YFYS will potentially mean the fund you join in your first job will become your fund over your entire working life.

Pros and cons of stapling

While the potential saving on fees and costs will be a positive outcome for many people, the possible downside is remaining a member of a fund that is not ideal for you. You may be stapled to a fund that:

• Is not cost competitive on fees and costs relative to performance
• Does not deliver solid long-term investment performance compared with other funds
• Provides insurance cover that is not appropriate for the occupation you are in and/or charges excessive premiums deducted from your super account, reducing your retirement savings.