Legislation to consolidate low-balance superannuation accounts needs to go further if it is to prevent a cycle of unintended accounts still being created and then subsequently consolidated, Rice Warner has suggested.
The research house found that while the Protecting Your Superannuation package would speed up the removal of unintended multiple accountants, predicting that 3 million super accounts would be closed in the short-term, young people particularly would continue opening multiple default funds.
Recommendations from the Productivity Commission and Banking Royal Commission however, went further in looking to prevent the creation of unnecessary multiple default accounts.
The Productivity Commission’s recommendation that members be allocated a single default fund at the beginning of their working lives and Commissioner Kenneth Hayne’s ‘stapling’ suggestion would both limit unnecessary accounts more effectively, Rice Warner said.
It noted however, that the Productivity Commission intended that its recommendation be implemented alongside the ’10 best-in-show’ model, the implementation of which looked unlikely.
Rice Warner also warned there could be negative implications to having less superannuation funds in operation, such as fees needing to rise to provide the same services but with less members. This could make many smaller funds unavailable; indeed, there had already been merger activity with funds seeking to avoid price increases.