An industry super fund initiative to consolidate multiple superannuation accounts on an opt-out basis will “cut through red tape” and could save eligible members an average of $260 a year in fees and insurance.
Industry Super Australia announced that eighteen industry super funds, so far, were cooperating on a “collective cross-fund matching initiative” which could save $100 million a year.
The first full scale deployment of the initiative seeks to automatically consolidate 500,000 low balance inactive accounts.
Industry Super Australia chief executive Bernie Dean said the initiative had been in design and testing for over a year.
“The initiative follows a successful 2017 pilot led by Industry Funds Services and nine industry funds which consolidated 50,000 accounts,” he said.
“It has been developed to cut through restrictive rules which limit the ability of funds to reunite members’ lost and inactive savings without first obtaining express consent.”
“Once a match is found members will still be able to opt out, but a survey following the pilot found members who had accounts consolidated were very happy funds proactively chased their savings.”
The move by industry funds comes ahead of proposed change by the Government to require more small and inactive accounts to be transferred to the ATO. The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 would also cap fees on small super fund accounts.
“This is the right thing to do for members – they expect the system to sort out multiple accounts for them,” said Mr Dean.
“Industry super funds have been consolidating multiple accounts for many years but it has relied on members kicking it off. This new initiative will cut through the red tape.”
“Consolidating the accounts will reduce duplicate charges and help members build their super savings faster.”
“There will be no charge to members associated with the matching of a superannuation account and no exit fees for duplicate accounts closed as accounts are consolidated,” said Industry Super Australia.
Industry Super Australia described the process as involving eligible inactive accounts (under $6,000) being put into a ‘collective pool’ and matched to active accounts in other participating super funds. AUSfund – an Eligible Rollover Fund owned by industry funds – will be used to match and consolidate the inactive accounts with an active account.
Inactive accounts sent to AUSfund but not matched to an active account will receive investment returns less an annual admin fee of $11.50 and 0.53% indirect costs “until consolidated in subsequent matching waves”.
“Where required, funds will inform members of their fund’s participation in the cross fund matching exercise through disclosures, including the annual member statements,” said Industry Super Australia.