Aussies Are Spending $2.6 Billion On Extra Super Accounts Each Year
Extra superannuation accounts given when changing jobs are costing Australians dearly.
What you need to know
- The Productivity Commission has found that Australians are paying $2.6 billion in fees and insurance premiums each year on extra superannuation accounts
- About one third of accounts -- about 10 million -- are extra accounts given to people when starting a new job
- The commission recommends changing the rules so that Aussies are only placed in a default account when they first start working
Australians are paying $2.6 billion in fees and insurance premiums every year on extra superannuation accounts they have been given when changing jobs.
A Productivity Commission investigation into the super system has found a third of accounts, or about 10 million, are unintended multiple accounts.
"With default funds being tied to the employer and not the employee, many members end up with another account every time they change job," the commission's deputy chair Karen Chester said on Tuesday.
The commission recommends Australians only be placed in a default fund the one time, when they start working for the first time.
It also wants them to be given a "best in show" list of 10 high-performing funds, identified by an independent expert panel.
The commission believes existing members should be able to switch to the nominated funds too.
"All members should be able to engage with their super without being bamboozled," commissioner Angela MacRae said.
Other recommendations include making funds provide insurance cover that is good value for money.
Trustees of underperforming funds should also be merged with better performing funds.
The commission describes its findings as a mixed report card and says the architecture of compulsory super is outdated after nearly three decades.
It argues being stuck in a poor-performing default fund can leave the average worker with almost 40 per cent less to spend in retirement.
"Fixing these twin problems of entrenched underperformance and multiple accounts would lift retirement balances for members across the board," Ms Chester said.
"Even for a 55-year old today, the difference could be up to $60,000 by the time they retire. And for today's new workforce entrant, they stand to be $400,000 ahead when they retire in 2064."