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.
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.”