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Slash Red Tape to Save Thousands of Retirees Super Fees
Slash Red Tape to Save Thousands of Retirees Super Fees
The Australian Government should reduce regulatory burdens on superannuation accounts in retirement to save tens of thousands of retirees from paying multiple sets of super fees and to provide greater flexibility for those who wish to continue working in retirement, according to the Super Members Council.
Currently, a cumbersome rule forces Australians who wish to engage in part-time work after retirement to open an additional super account for their contributions. This prevents them from making payments directly into their existing retirement super accounts.
To simplify and enhance flexibility in retirement, the Government should end the prohibition on receiving contributions from part-time work or other sources into retirement (decumulation) phase accounts.
The Super Members Council estimates that approximately 100,000 retirees would benefit from this change.
This outdated law adds unnecessary complexity to retirement, causing some retirees to pay two sets of fees and often more tax than necessary. Recent consumer research commissioned by the Super Members Council found that one in four Australians continues to work into their early 70s, highlighting the need for a more adaptable system.
“As more than 2.5 million Australians approach retirement in the next decade, the focus needs to be on making the system easier, simpler, and more flexible,” said Super Members Council CEO Misha Schubert.
“Increasingly, many Australians want to dip back into the workforce from time to time after they start their ‘capital R’ retirement. But instead of making that process easy, they currently must open a second super fund account, face the administrative hassle of transferring money, and pay extra fees—potentially more tax—than necessary.”
“The easy fix is to legislate for Australians to make super contributions from part-time work and other sources directly into their retirement account. This simple reform would make retirement easier and more flexible for tens of thousands of Australians.”
Deidentified data from a large Super Members Council member fund shows that around one quarter of their members in retirement set up new accounts to accept contributions and then commute to a new retirement income account. The number of members doing this increased by 45% between 2022 and 2023.
The change would require a minor legislative update to the Superannuation Industry Supervision Act and adjustments to associated regulations. The Super Members Council does not propose changes to the pre-tax super contribution settings.
To streamline retirement while maintaining flexibility for retirees, the Government should:
- Swiftly consult and legislate the retirement and super component of the financial advice reform package before the end of this year.
- Make it easier for members to switch into retirement products and end the current ban on adding contributions to a retirement-phase super account.
- With member permission, notify super funds about their members’ eligibility for pensions and other government supports, enabling tailored information on maximising retirement income.
- Develop a comprehensive retirement test for super products that measures investment performance, flexibility in accessing funds, and control over the level of risk.
- Avoid mandating the use of annuities for members. Trustees are best placed to create investment strategies for their members.
The Super Members Council advocates for over 11 million Australians, managing more than $1.5 trillion in retirement savings through profit-to-member superannuation funds. The council aims to protect and advance their interests, ensuring that superannuation policy remains stable, effective, and equitable.
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