The future of your super starts on 1 November

Article published 7 July 2021

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The Your Future Your Super bill was passed into law on 22 June meaning that there will be changes to the superannuation industry.

From 1 November 2021, Australians with existing super accounts will be ‘stapled’ to their current super fund. The new stapling feature will help prevent people joining multiple super funds when they start a new job which will reduce the higher amount people pay in fees when they have multiple super accounts.

Unfortunately, the stapling won’t address people who currently have multiple super accounts and won’t do people any favours if they are stapled to a poor performing fund.

On the topic of performance, the Your Future Your Super reforms aim to address the problem of underperforming funds by having the regulator conduct annual objective performance tests. From 1 July, funds that fail the performance test must inform their members of its underperformance by 1 October and provide members with the tools necessary to switch funds.

However, the onus is still on individuals to firstly understand what it means that their fund is underperforming and will leave it up to them to initiate the switching of super funds.

Performance testing is a good idea, but it will only apply to default super funds, that is, funds chosen by employers for their employees. Everything else will be excluded from performance testing despite a Productivity Commission explicitly suggesting these products should be performance tested.

Also from 1 July, the Superannuation Guarantee (SG), which is the minimum percentage of an employee’s salary an employer must pay to their workers’ super funds, will be increased from 9.5 per cent to 10 per cent. The SG is legislated to rise by 0.5 per cent every year for the next four years until reaching 12 per cent on 1 July 2025.

On another note, before-tax after-tax super contribution caps will be indexed on 1 July. The before-tax contributions cap for 2021-22 will increase from $25,000 to $27,500.

The cap on after-tax contributions will increase from $100,000 to $110,000.

The amount of super savings that can be transferred into a retirement pension will also increase from $1.6 million to $1.7 million.

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