Growth in people with multiple jobs means default super has to change: FSC

Share this article:

An increase in the number of people working multiple jobs has pushed the Financial Services Council to reiterate calls for changes to the default super system.

The latest statistics from the ABS show that the number of workers with more than one job had increased from 1.8 million in 2011/12 to 2.1 million in 2016/17.

74% of people working multiple jobs had jobs across multiple industries, which the Financial Services Council (FSC) says means they are likely to have different default super funds.

The FSC says the increase in the number of Australians with multiple jobs is a “strong motivation to fix” the default super system.

The FSC – which includes as its members the owners of large retails super funds – has long been campaigning for changes to the default super system.

FSC CEO Sally Loane said: “The ABS data reveals women are more likely to hold multiple jobs, with 17.5 per cent of women holding more than one job during the 2017 financial year, compared to 13.8 per cent of men. One in four people under the age of 30 held more than one job, with the rate highest around age 19.”

“Data also shows 74 per cent of people with multiple jobs work across more than one industry – meaning they are more likely to have accounts in two or more different default super funds and pay duplicate fees and charges as a result.”

“Under the current default system, most Australians do not make a choice when it comes to their super fund, and every time they change jobs, they’re defaulted into a new, separate account, while the old one gets eroded by fees and charges.”

Both the Productivity Commission and Financial Services Royal Commission recommended changes to default super, but the Government has yet to fully respond to the recommendations. The Productivity Commission recommended that new members of the workforce should only be defaulted into a super fund once. The Hayne Royal Commission recommended that people should only have one default super account, to which they are ‘stapled’. The Government agrees with the Royal Commission that people should only have one default fund, but has yet to lay out a model to implement it; the Government has yet to respond to the Productivity Commission report.

In part, these recommendations are driven by concern about unnecessary multiple super accounts.

The FSC says the Government’s Protecting Your Super reforms is addressing the proliferation of these so-called ‘zombie’ accounts, but that action is needed to stop them being created in the first place.

“Creating additional default accounts for new employees, or requiring the rollover of their savings into a new default account, just does not work for people with multiple jobs. The Productivity Commission estimated rollovers of super accounts when members change jobs would cost $45 million every year,” Loane said.

“Unless the Government legislates the recommendations of both Hayne and the Productivity Commission, account proliferation will continue to be a substantial cost burden for people with multiple jobs, many of whom, as the data indicates, are women and young people, who are likely to earn lower incomes than people with only one job.”

“The current default super system is clearly failing people with multiple jobs and this data demonstrates the importance of implementing reforms to prevent the ongoing creation of new duplicate accounts.”

Industry Super Australia has criticised the Productivity Commission recommendations on default super, saying it would abandon “the proven, low-cost industrial default system in favour of a choice-first architecture that has been ground zero for consumer harm”. Industry Super Australia has also proposed that instead of stapling people to a single default super fund, as recommended by the Royal Commission, they should instead be automatically rolled over to a new default fund when they change jobs.

Want to be kept up-to-date with SMSF and Superannuation changes, why not subscribe to our Newsletter?

This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

Share this article:

Leave a Reply

Your email address will not be published. Required fields are marked *