Tens of thousands of Australian retirees could be spared paying multiple sets of super fees if the Government reduces red tape on super accounts, according to the Super Members Council. The council is calling for reforms that would allow retirees to continue working part-time without needing to open additional super accounts, simplifying the process and reducing unnecessary costs.
Currently, a rule requires retirees who take on part-time work to open a new account for their super contributions. This adds complexity and often results in retirees paying double fees and potentially higher taxes. The Super Members Council argues that this outdated regulation should be abolished, allowing contributions from part-time work or other sources to be made directly into existing retirement super accounts.
The council estimates that around 100,000 retirees would benefit from this change. As retirement becomes more fluid, recent research commissioned by the Super Members Council reveals that one in four Australians continues to work into their early 70s.
Misha Schubert, CEO of the Super Members Council, highlighted the need for a more flexible and straightforward system as over 2.5 million Australians approach retirement in the next decade. Schubert explained, “Many Australians want to return to the workforce occasionally after starting their retirement. However, they are currently forced to open a second super fund account, facing administrative hassles and extra fees. A legislative change allowing contributions directly into retirement accounts would simplify the process and reduce costs for retirees.”
Data from a significant member fund within the council indicates that approximately a quarter of members in retirement set up new accounts to accept contributions before transferring them to a retirement income account. This practice is on the rise, with a 45% increase between 2022 and 2023.
The proposed change involves a minor legislative update to the Superannuation Industry Supervision Act and adjustments to associated regulations. The council does not suggest altering the current pre-tax super contribution settings.
To streamline retirement and maintain flexibility for retirees, the council recommends the following actions for the Government:
Quickly consult and legislate the retirement and super component of the financial advice reform package by the end of the year.
Make it easier for members to switch to retirement products and end the ban on adding contributions to retirement-phase super accounts.
Notify super funds about their members’ eligibility for pensions and other government supports, with member permission, so tailored information on maximising retirement income can be provided.
Develop a comprehensive retirement test for super products that measures a wide range of factors, including investment performance and flexibility to access funds in retirement.
Avoid mandating the use of annuities for members or groups of members, leaving trustees to create appropriate investment strategies for their members.
The Super Members Council, representing over 11 million Australians with more than $1.5 trillion in retirement savings managed by profit-to-member superannuation funds, is dedicated to advocating for stable, effective, and equitable superannuation policies.
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The Super Members Council urges reforms to reduce red tape on super accounts, allowing retirees to work part-time without opening new accounts, simplifying processes & reducing fees for around 100,000 retirees. 📉👵👴💼🇦🇺 #TheIndianSunhttps://t.co/vkR2tyC9DQ
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