Aussies in the dark over big super changes that came in this week
The majority of Australians are unaware of the effects of the Your Future, Your Super (YFYS) reforms and could potentially be stapled to an underperforming fund for good.
The YFYS stapling requirement came into effect this week and will see around one million members tied to a superannuation fund that has failed APRA's performance test.
A UMR survey of 1120 respondents found that just 20% knew about the changes or what could happen to them if they don't choose a fund while 70% were unaware of what 'stapling' meant in relation to superannuation.
In addition, 42% had a vague understanding that super was changing but did not know what the reforms are and 38% did not know there were changes at all.
"Most people don't know that government changes to super laws will see them stuck to their current fund, which could leave many stapled to a dud that hasn't passed the government's own performance test," says Industry Super Australia chief executive Bernie Dean.
"Being stuck to a dud fund could punch a huge hole in a person's nest egg, and that is going to limit how much they enjoy life in retirement - people should make sure they are with a good fund."
ISA previously lobbied for the government to amend the YFYS package to only allow workers to be stapled to funds that passed the performance test - to no avail.
"Given the risks to so many people's livelihoods the government needs to tighten up protections to make sure people are only stapled to the best funds that have passed the performance tests," Dean says.
Meanwhile, Super Consumers Australia welcomes the stapling measure but is calling on the government to ban occupational exclusions from default life insurance in super.
"Stopping the scourge of costly duplicate accounts will ultimately lead to bigger retirement savings for people, but without action from Parliament there is a risk some people will lose access to affordable default insurance cover in their super," says Super Consumers Australia director Xavier O'Halloran.
"The greatest benefit of default insurance is its ability to share risk among a large group of people, so that everyone has access to affordable cover. A very small number of funds have undermined the value of their cover by carving out certain occupations. This creates gaps and weakens the safety net. It's not in keeping with the needs of people in a modern workforce, who change jobs and industries throughout their careers, but still expect to have a base level of protection."
CSBA and Fund Executives Association Limited (FEAL) in partnership with Melbourne Business School conducted a similar survey on employers and found 54% were not aware of the stapling requirement.
Don't forget to complete Money's superannuation survey!
Get stories like this in our newsletters.