As long ago as 2006 CFA member Choice called attention to the huge losses suffered by consumers through fees and administrative costs on lost and multiple superannuation accounts. With input from data from Rice Walker actuaries Choice estimated consumers lost between $1.2 and $2 billion per annum in unnecessary fees and charges
At that time there were 28 million superannuation accounts in Australia – 2.6 for each member of the labour force. Current estimates suggest there are still at least 2 accounts per person despite past reforms to enable and encourage account consolidation.
For the vast majority of people multiple accounts are unnecessary and cause significant financial harm.
The Choice Report The Super Secret: How multiple accounts cost consumers billions was released in November 2006. While there have been some legislative changes including in particular “Choice of Super” the analysis in the report is still useful. The report tracks the startling growth in the number of funds, identifies where funds are and explains the barriers to account consolidation. It contains detailed recommendations on an approach to reform.
Government reforms to require low balance accounts (less than $1,000) to be consolidated into the consumer’s current and most active account will come into force from January 1, 2012. According to the Minister for Financial Services’ media release:
The Government will help superannuation funds and their members locate and consolidate multiple member accounts. New processes will see lost and inactive accounts, with balances under $1,000 and in eligible rollover funds, consolidated into the member’s current active account, unless the member opts out. This reform will reduce the amount of fees paid on multiple accounts and maximise retirement benefits.
This reform is part of a package of reforms called Stronger Super which includes the creation of improved default “MySuper” accounts. No commission is payable on compulsory (ie Superannuation Guarantee) super payments into a MySuper account from October 2013.