Older members of self-managed superannuation funds (SMSFs) who choose to return to the workforce are often forced into default funds against their wishes, giving greater weight to the need for the Government to legislate on choice of superannuation fund, according to the SMSF Association (SMSFA).
In a submission filed with the Senate Economics Legislation Committee, the SMSF Association claimed that being forced into a particular superannuation fund without choice not only affected younger, disengaged members but also older individuals transitioning to retirement that might already haven an SMSF.
“A common scenario for SMSF members, of whom approximately 60% are aged over 55, is working in part-time jobs which can often fall under an enterprise agreement while transitioning to retirement,” the submission said. “These people are restricted from having their SG contributions made into their SMSF and are instead required to have contributions made to the relevant default fund under the agreement.”
“The SMSFA understands that there are many SMSF members affected by agreements that do not let them choose where their superannuation guarantee contributions go, including to their own SMSF,” it said.
The submission claimed that arrangements which did not give employers or employees any choice as to where superannuation contributions were made created a multitude of issues, “the most significant being account proliferation and the consequent multiple set of fees and insurance premiums which continually erode superannuation balances”.
“Opening up choice of fund to all employees will also increase the efficiency of the superannuation system by removing the need of employees who are constrained by an enterprise agreement or other restriction to roll-over their contributions to their fund of choice,” it said.