It is a fundamental right of all employees to choose their own super fund, and it should be an integral part of the superannuation system, the SMSF Association has told a Senate committee.
The Senate Committee on Economics has been conducting an inquiry into a Bill which would expand choice of super fund.
Currently employers under some workplace and industrial agreements don’t have a choice as to which super fund receives their employer contributions. The Treasury Laws Amendment (Improving Accountability and Members Outcomes in Superannuation Measures No. 2) Bill 2017 would remove this limitation from agreements made on or after 1 July 2018, if passed.
“Giving all employees the option to select their own superannuation fund is an essential element in promoting an efficient and competitive superannuation sector,” said SMSF Association CEO John Maroney.
The Senate committee was told that many SMSF trustees are adversley affected by not being able to choose their own SMSF to receive employer contirbutions.
“A common scenario for many SMSF trustees, of which about 60% are 55 years or older, is to be working in part-time jobs under an enterprise agreement while transitioning to retirement,” Maroney said.
“The fact they can be employed under an enterprise agreement that can dictate where their SG contributions go is unfair and inefficient and needs to be changed.”
The SMSF Association says expanding choice will also benefit non-SMSF super fund members.
“Arrangements that fail to give employers or employees any choice as to where their SG contributions are made have widespread negative consequences of which the most significant is account proliferation, resulting in multiple sets of fees and insurance premiums that erode superannuation balances,” Maroney said.
Maroney told the Senate inquiry that expanding super choice would increase efficiency in the super system by reducing the need for continual roll-overs.
“This is often the case for employees who don’t have unconstrained choice of superannuation fund but wish to control their own superannuation through an SMSF. They receive contributions from their employer in their default fund and then periodically roll over these amounts to a superannuation fund of their choice,” he said.
The change would also improve competition in the superannuation industry, according to the Association.
“All employees should have the right to enter the fund of their choice, including an SMSF, when starting new employment, and not be forced into a fund because of an enterprise agreement or industry award.”
“Overall, our Association is concerned about having the right settings for the broader superannuation system and we see choice of super fund as a key element of an efficient and effective Australian superannuation system.”