Passing both the House of Representatives and the Senate today, the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 will ensure 800,000 Australians covered by enterprise agreements can make choices about where their retirement savings are invested.
This apparently represents around 40 per cent of all employees covered by current enterprise agreements.
According to a joint media release from federal Treasurer Josh Frydenberg and Senator Jane Hume, the Assistant Minister for Superannuation, Financial Services and Financial Technology, by not providing employees with a choice when it comes to super, it can discourage member engagement and promotes the payment of higher fees.
The bill addresses the findings of the Financial System Inquiry and the Productivity Commission Inquiry into the efficiency and competitiveness of the superannuation system, which considered such a reform as “much needed”.
The minister’s statement also indicated that the reform is supported by a recent Fair Work Commission decision which found it “detrimental” to employees to restrict them from being able to choose their own fund.
“Specifically, the Fair Work Commission determined that extending choice of fund to employees who were previously denied choice will prevent them from unnecessarily ending up with multiple superannuation accounts ‘with all the inconvenience and additional administration costs that this involves’,” it outlined.
According to Mr Frydenberg and Ms Hume, the changes build on the government’s earlier reforms which protect superannuation accounts from being eroded through fee capping and require insurance to be provided on an opt-in basis for new members under the age of 25.
This change is definitely a major step in the right direction, but something that has not been mentioned is that the amendment only applies to NEW agreements or determinations entered into AFTER 1 January 2021.
So employees who DON’T have choice currently won’t have choice until the agreement / determination they’re covered by is replaced with a new agreement.
The argument is that by making choice of fund applicable to employees under existing agreements, it would place additional burden and cost on employers.
I would challenge this assumption. I may be wrong, but aren’t most of the employers who have employees under enterprise agreements and determinations larger companies, universities and public sector employers that have the resources and systems to more easily implement these choice of fund?
Also with STP and SuperStream there should be no impediment to make choice a reality.