Under the new superannuation legislation, if you have more than one superannuation account within one superannuation fund, the Trustee of that fund has the power to merge your two or more accounts together without your permission.
From 1 July 2013, superannuation funds must establish and implement procedures to consolidate accounts where a member has multiple accounts within a superannuation fund and consolidation is in the member’s best interest.
The aim of this new legislation is to reduce the number of unnecessary accounts. This will help increasing superannuation account balances by ensuring members do not have to pay unnecessary fees and insurance premiums on multiple accounts and reduce the number of lost accounts.
You may have multiple superannuation accounts if you have different jobs within the same industry and you don’t choose your own superannuation fund so each of your employers sends your superannuation guarantee (SG) contributions to the same default fund. This fund sets up a new account for you every time they receive an SG contribution from your new employer.
When you have multiple accounts you’re paying multiple sets of administration fees and insurance premium unnecessarily. This occurs when your new employer pays SG contributions to their default fund on your behalf; that fund is legally obligated to give you a minimum default insurance cover and you end up having to pay more insurance premiums. By having more than one insurance cover doesn’t mean you’ll get multiple payouts when you make a claim. Group insurance policy generally specifies that they only pay out once even if you pay insurance premiums for multiple accounts.
The Superannuation (Industry) Supervision Act 1993 has been expanded to place a duty on the trustee of a superannuation fund to:
- Establish rules setting out how they will find multiple accounts held by one member within their fund;
- Search for multiple accounts at least once a year; and
- Merge the multi accounts (except defined benefit and income stream accounts) into one where the trustee reasonably believes it would be in the member’s best interest.
Under this new process, the trustees will not be able to charge fees other than the buy/ sell spreads.
The trustee must consider whether or not merging the accounts is in the member’s best interest. In deciding whether it is in the member’s best interest to merge, the trustee must take into account the possible savings in fees, charges and insurance premiums after merging multiple accounts into one single account.
Trustees are not required to merge accounts if they consider it is impractical to do so. This may include where a member has an interest in a hybrid scheme (defined benefit and accumulation components). However, the costs associated with implementing the process are not considered impracticable.
Trustees may but will not be required to obtain the member’s consent to merge accounts.
This new rule will commence from 1 July 2013 and trustees are required to establish rules and complete the first annual consolidation process by 30 June 2014.