The Turnbull Government has introduced to Parliament a range of reforms aimed at protecting superannuants against the undue erosion of their balances through excessive fees and inappropriate insurance arrangements.
The Treasury Laws Amendment (Protecting Your Superannuation Savings Package) Bill 2018 would also enable the Australian Taxation Office (ATO) to proactively reunite Australians with their low balance, inactive accounts, Federal Minister for Revenue and Financial Services, Kelly O’Dwyer, said.
“The Turnbull Government has taken action to protect the hard-earned superannuation savings of millions of Australians from rorts and rip-offs,” she said.
The Bill prevents trustees of superannuation funds from charging administration and investment fees exceeding 3 per cent per year, of the balance of accounts below $6,000. The Government's changes also prevent trustees from charging exit fees when members close or roll over their superannuation accounts, no matter their balance, O’Dwyer said.
These changes will help to prevent erosion of low balance accounts by high passively-incurred fees and will remove a disincentive to superannuation fund members consolidating and closing unwanted accounts, she said.
Also, under this Bill, fund trustees would be required to provide insurance on an opt-in basis only to new members aged under 25 years, members with account balances below $6,000, and members with inactive accounts, unless a member has directed otherwise, O’Dwyer said.
“This will better target default insurance cover and prevent inappropriate erosion of retirement savings by insurance premiums for cover members do not know they have, that goes beyond what they need, or which they cannot even claim on,” she said.
Importantly, members will still be able to obtain insurance cover within their superannuation if they choose to do so – young, inactive and low balance account holders will still be able to opt in to insurance through superannuation.
O’Dwyer said the Bill would also further protect accounts below $6,000 from fees and charges by requiring them to be transferred to the Commissioner of Taxation if they have been inactive for a continuous period of 13 months.
“The Government will empower the Commissioner to then proactively pay these amounts, plus those lost accounts already held by the ATO, into the rightful owner's active superannuation account.”