Industry funds want automatic rollovers

Industry Super Australia (ISA) is again advocating an automatic rollover and account consolidation model for superannuation fund members when they change jobs, with new research undertaken by KPMG to back the proposition.

The KPMG essentially compared the ISA’s preferred automatic rollover and consolidation model against proposals to “staple” superannuation accounts.

The industry funds group said that such a move could generate an additional $416 billion in super nest eggs, equating to an additional $189,000 per person if superannuation accounts were automatically combined when they changed jobs.

Related News:

The ISA said the KPMG report that the industry super fund model of automatic rollover would not only eliminate multipole accounts, but would accelerate the weeding out of under-performing funds sooner.

“If the Morrison Government chose to adopt and implement the automatic rollover model, workers in underperforming funds would benefit from an extra $416 billion in returns over a 25-year period – the equivalent of nearly $200,000 per person, or an extra $7,560 a year, over their working life,” the ISA claimed.

It said that, in contrast, under the fund for life model, workers could end up stuck in dud, underperforming funds for many years, and miss out on hundreds of thousands of dollars by the time they reach retirement.

“Separately, workers would also benefit from $47.3 billion in savings in fees and premiums, including the impact of recent changes, through the elimination of multiple accounts – nearly $4 billion more than the fund for life option,” the ISA said.

It said the automatic rollover model was based on international schemes such as the New Zealand Kiwi Saver scheme and that while some headway has been made by Government to eliminate multiple accounts through the Protecting Your Super changes, more needs to be done.

Commenting on the KPMG report, ISA acting chief executive, Matthew Linden said chronic underperformance and multiple accounts were the two biggest drags on the system, costing workers hundreds of thousands of dollars in hard-earned super.

He said the proposition being promoted by the ISA would fix both problems at the same time.

“This report shows the huge efficiency gains that can be made through smart policy,” Linden said. “ISA’s plan will fix multiple accounts, weed out underperforming funds, and most importantly, deliver more money for workers.”




Recommended for you

Author

Comments

Comments

Did Paul Howes have anything to do with this report? I can see now why KPMG brought him on as a partner. He has been able to bring with him the rivers of gold relationship of the ISA on the promise of KPMG delivering pre-determined beneficial ISA reporting outcomes. Then again, my wife says I am getting more cynical as I get older...perhaps she is right (not that I'd admit it to her)

My wife says the same thing that i am getting more cynical to all the solution providers that are popping up now and consultants who can make a balance sheet, P&L and few stats make it say what you pay for. Oh for the simpler world we used to have that didn't seem to have issue of being told of problems to be solved by people who can solve them for us.. Back to Utopia for me as i have NFI.

Automatic rollover may not meet the Best Interest Duty of the member......oh that's right, the ISA and Industry Super are absolved of that requirement.

Add new comment