Anything and Everything about Superannuation

I am a strong critic of AMP and their past. However I believe they had no other option. They likely consulted APRA and several expensive advisers to make that choice. A media beat up really. AMP could do no more. Super must be preserved until the member actions it. Members cant choose another fund other than by rollover of benefits. So the benefits must be created first.

A fund has no authority to transfer benefits without member consent. If they did it would be a taxed contribution and unlawful. Each member receives their compensation and now must consider if it is to be rolled over etc. I would imagine these accounts are noted as fee free and accompanying info will be received by each member. I had involvement with a large fund several years ago in such a case. We assisted the Trustee who also consulted APRA and its lawyers who affirmed the same view. We had to use complex calculations to ensure the amounts were fair and reasonable and then create accounts for former members and ensure the fund paid income but charged zero fees or charges. Former members were encouraged to rollover within three months and all but a few did. The remnants were often former deceased estate issues who had no idea how to proceed. They were all referred to the fund solicitors. who gave free advice.

 

The fee cap requires RSE licensees to cap their administration and investment fees(including indirect costs) at 3 percent per annum for members that have a final balance of less than $6,000 for their MySuper or choice product in an income year.

Protecting your super package - frequently asked questions | APRA

A friend with Australian Super just said his fees are increasing to offset the companies paying for this protection of members with low account balances

 

Yes quite true and for industry funds its even worse - Guess who pays for the ads to attract new members and those very misleading "compare the pair" ads. Wonder how Mick Fanning adds to the value of the existing SunSuper members he did ads for ? IDK total cost of the fees, ads and production has to be $500K....And their corporate box at the footy, cricket etc. Theese large funds merge so gain marginal cost benefits - Their argument. However reality is the CEO and senior team then gets a windfall salary and bonus. And the former managers get redundancy - Paid by the members.

Funds are also brutal with members who have balances that dont fall within mins who dont have contributions to keep it from being stale. They can send them to the ATO unclaimed fund now with far less restriction. This is further reason why most funds pay 0.01% on basic cash holdings. The earning rate drops to fund the costs. Nobody wins.

Many of these changes are nanny state conditions imposed on the trustee by APRA Treasury and Govt. They sound so good when its budget night. The opt out on life cover has seen some premiums climb 20% as healthy young members with low costs bail leaving the costs to be borne by older and less able members.

 

Fees are changing | AustralianSuper

 

Up to 0.04% of your account balance

 

It's being backdated...so .04% X 4. APRA will have more to say on this since it's never been reserved provided or announced.

Wonder what the auditor has to say about a board that didn't mention it

 

Only a minor quibble with your post overall, but why should healthy young members be defaulted into life cover they never consciously agreed to purchase, so that more risky old people can enjoy lower costs?

 

They shouldnt. But they should be able to also choose with a regular review period eg when they marry, have kids, get a home etc. Life products in super need to change. The effect of a default opt out means many more uninsured persons. This is skewing the cover to more claim prone persons hence the premium rises.

In time we will read stories about young people with kids who find they have no life cover. Many people assume life cover still exists in super. We already see many in the 40-50s with terminal or incapacity illness who find themselves with no insurance. Had a client recently who thought he could withdraw his super at best on diagnosis. He then learned he had $1.1m of TPD and $1.1m of life cover. He immediately sought advice on his now generous estate planning to assist the family and kids.

 

The SMSF dilemma: would you be better off with a professional fund manager?

The debate rages on whether self-managed superannuation fund (SMSF) investors would be better off handing over their savings to professional fund managers.

The marketing pitch for self-managed superannuation funds (SMSFs) sounds compelling: greater financial control and tax breaks along with the business benefits and flexibility equals financial success.

Then why are SMSFs under fire in some quarters? The short answer is that, for now at least, some SMSFs are not matching the returns of default MySuper funds regulated by the Australian Prudential Regulation Authority (APRA). That is a real worry, given that in Australia there are more than 595,000 SMSFs with combined assets of about A$712 billion, representing about one-third of the total superannuation sector.

Aaron Dunn, CEO of Smarter SMSF, concedes there is always likely to be volatility with the performance of self-directed funds.

“[However] not to the extent that it’s become a huge problem, and ASIC [the Australian Securities and Investments Commission] has stepped in where needed.”

 

There is intense lobbying by industry players on trying to limit SMSFs and also by the SMSF industry trying to redress many flawed claims by industry and public offer funds about SMSFs

At stake is 17billion per year of cashflows to smsfs and $748b of assets.

 

@Paul@PFI

The Super pot is tempting to government and industry sticky fingers alike

The insurance companies, then banks etc all got a great leg up with the initial introduction of compulsory super

Great to see fees drop over the years

Singapore's Central Provident Fund and how they manage it is an interesting read also

 

When I was investigating changing to an industry fund, it turned out the fees charged would have been much greater than the amount the SMSF currently pays. A bit off putting.

Still, it isn't necessarily all about money. Big factor though.

 

One of the strengths to Australia's super system is that each fund has a different trustee and none have any direct Govt control incl the Commonwealth public sector scheme. Australian super law contains a criminal prohibition on external direction of a trustee.

The Singapore system is compromised as the fund may be induced to invest in Government projects or in compromised investmnets eg read here about controversies Central Provident Fund - Wikipedia

 

I'm a bit confused by concessional super contributions and wonder whether someone could explain it to me.

I have two super accounts. The main one is a PSS defined benefit account for which I am maximising my contributions. As a government defined benefit account, these contributions are not eligible to be concessional. It's on track to give me a retirement income equivalent to my current salary, so it's more than enough on its own. I'm currently 46 and the planning tools on the PSSdb website forecast that I will hit the $1.6M superannuation balance cap a year or two before retirement if I keep doing what I am doing, even if I use very conservative assumptions about future pay rises.

My second super account is in an accumulation plan that has a little over $100k sitting in it. I am not currently making contributions to it, and wonder whether I should. I believe that I can make concessional contributions to this second account. I am in the 37c per $ marginal tax bracket, so on the face of it, this would be worth doing -- but how does the super balance cap come into play? If I put more money into the second super account, will it reduce my eventual income from the PSSdb account because I will hit the limit earlier and not be able to continue contributing?

I also have investments outside super so I don't have all my eggs in that basket.

 

2 years ago all defined benefit funds were affected by rules which deem a concessional contribution to DB accounts despite there not actually being a contribution AND also rules which impact valuation of the accounts for the $1.6m impact. These are quite complex changes and contain no basis of choice for those affected. The DB rules flow through and impact the other fund. Members are affected by a whole of super rule.

You should seek financial advice before considering making ANY contributions. You may already be in a potential position where contributions are prohibited.

 

Superannuation has failed and should be scrapped in Australia, according to a top expert | Daily Mail Online

Sydney University economist Dr Cameron Murray thinks superannuation should be scrapped

Australia's superannuation system should be dismantled and replaced by an aged pension, according to a leading economist.

Sydney University economist Dr Cameron Murray believes the pension to be more efficient than superannuation and thinks it could help boost Australia's struggling retail sector.

He believes 'scrapping the super system would massively improve Australia's economic performance.'

The current process, which requires Australians to sacrifice some of their annual salary in an account they can't access until retirement, is 'costly, inefficient, unnecessary, and incredibly unfair,' he said.

 

Its always terribly unfair that some people chase education and effort to produce high incomes, save during their lifetimes and set aside more super and wealth than others. Even in Beijing they dont adopt this position.

I know which I will choose given the choice.

 

And he's getting 17% Super

Financial benefits

• competitive salaries
• a University contribution of up to 17% of base salary to your superannuation (pension) fund
• tax-efficient salary packaging options for motor vehicles, laptops, parking permits, and additional contributions to your superannuation fund
• a free staff benefits program providing online and retail discounts across an extensive range of goods and services
• on-campus UniSuper superannuation advice, seminars and financial advisers.

 

Scrap long term savings plan to boost short term retail sector pain? Genius ...

 

Full paper is available here https://gameofmates.files.wordpress.com/2020/01/superreport_publish_jan2020-1.pdf


The compulsary employer contributions be given to the employees (so presumably it can be spent in retail - hence the boost to retail)
Anyone who has money in super is released $20k a year of their existing savings (to additionally presumably boost retail sales!)

Economy would be buzzing - I'd stock up on JB Hifi shares!