There’s been a lot of media discussion in recent weeks about super. This stems from the release of the Productivity Commission’s report into the efficiency and competitiveness of the super system following a three-year review.
The 772-page report covers a broad spectrum of issues and policy associated with Australia’s superannuation system, containing 31 recommendations for consideration by policy makers. These relate to multiple accounts, investment performance, insurance, governance, the role of the regulators and the default fund system.
Importantly, this extensive review confirms the overall strength and relevance of our super system, and the important role that compulsory contributions and universal coverage have played in delivering for our community. Australia’s super system is ranked as one of the best in the world in terms of sustainability, adequacy and integrity – something we can all be proud of.
The review also highlighted the impact that sustained under-performing funds can have on retirement outcomes, along with factual evidence that profit-to-member funds like Mercy Super dominate the better performing funds.
There is likely to be ongoing debate about the findings from the Commission’s review and any changes this may mean in the future – especially as we head into a Federal election. However there are some key insights that all members can consider and act on:
- Unintended multiple accounts reduce retirement balances. The review found that over a third of all super accounts are ‘unintended multiples’ with the associated administration fees and unintended insurance premiums reducing retirement outcomes. This is a problem that is easily solved by everyone taking the time to search for and consolidate any of your unwanted accounts – it takes just minutes. Refer to the find and combine page on our website or contact us to find out how.
- Underperformance leads to substantially lower retirement balances. While it’s probably obvious, the review quantified the significant impact on balances in retirement of being in a fund with sustained investment under-performance. The review also presented clear evidence that it is the member-first focused profit-to-member funds like Mercy Super that make up a significant majority of the top performing funds over time. You can keep track of how Mercy Super is performing through the investments & performance page on our website. For the period to 31 December 2018, Mercy Super’s MySuper Balanced default option was one of only a handful of funds with sustained returns in the top quartile (that is the top 25%) over 1, 3, 5 and 7 years1.
- Auto-consolidation of inactive accounts under $6,000. The review recommends legislation to require super accounts with balances under $6,000 and where there has been no account activity for 13 months or more to be closed and transferred to the Australian Taxation Office for future auto-consolidation. This would also cancel any insurance cover within these accounts. If you have an account with a balance below $6,000 which hasn’t seen a contribution for some time, consider whether this account has any features you need (such as insurance cover or preferred investment options) and arrange for some contributions to be made to this account. (We recommend trying to at least cover the cost of any insurance premiums. Alternatively, consider transferring it to another account you may have.
- Take your super with you. Super fund accounts, including those with Mercy Super, are now portable meaning you can take them with you to a new workplace or, if you have ceased work, provide an income in retirement. So if you have a super account that is working for you, has the features such as insurance cover and the investment options you need, simple and effective online access and additional services on call, why not take it with you if you change jobs or retire? Find out more from the changing jobs page on our website.
Remember – act on what you know, not what might be
Superannuation is a major component of the Australian economy and as such you can expect ongoing review and speculation about refinements to the system. When there is increased debate about super in the media it’s important to remember:
- Debate about changes to super policy in the media is just speculation at any point in time – until change is mandated or legislated, it is just speculation.
- You are part of one of the best retirement income systems in the world and as a Mercy Super member, part of a profit-to-members fund that is amongst the top performers.
- When considering the best strategy for your super, don’t get caught up in speculation. Act on what you know, not what might be.
If the media discussion has got you thinking about your super, we encourage you to take the time to check your Mercy Super benefits and make sure we’re doing everything we can so your super is working hard for you. Never hesitate to contact us; looking after your best interests is the sole reason we exist.
1. Investment performance of industry median according to SuperRatings at superratings.com.au. Past performance is not a reliable indicator of future performance.
Issued by Mercy Super Pty Ltd ABN 98 056 047 324 AFSL 418976 Trustee of Mercy Super ABN 11 789 425 178. The information provided is of a general nature only and does not take into account your individual financial situation, objectives or needs. Accordingly, before acting on the information, it is important that you consider the appropriate Product Disclosure Statement, available from mercysuper.com.au or by contacting us, having regard to your own particular situation.