What do employers need to do to ensure they remain compliant with looming changes to superannuation, particularly MySuper? Douglas Latto explains what's in store.
After a long line of “My’s”, such as MyTrain and MySchool, comes MySuper.
What is MySuper? Who does it affect? What action is required?
In short, MySuper will affect nearly all employers and most employees – so it cannot be ignored and it is coming soon.
When does MySuper start?
Super funds will introduce MySuper between 1July 2013 and 1 Jan 2014. Failure to do so will mean that the fund will no longer be able to accept super guarantee contributions.
Only 120 funds are likely to offer a MySuper option so employers will need to ensure that their default super fund (the fund to which employers place employee contributions, should they not choose a fund of their own) is one of those.
What is MySuper?
To all intents and purposes MySuper is an investment strategy within the employer’s default superannuation fund.
Most super funds allow members to choose an investment strategy, however approximately 80% of members don’t take choose and consequently are invested in the default investment strategy of their employer’s fund. In future this strategy has to be the MySuper option.
After the introduction date, superannuation guarantee contributions will be paid into MySuper for both new and existing members who have not made an investment choice.
How does this affect employers?
Employers will need to consider the following:
Does their current default fund offer MySuper?
MySuper funds will offer a minimum cover for death and disability. If the fund already offers superior cover then the employer needs to ensure that the cover is not reduced to this minimum
If the fund has a corporate super specialist adviser it is possible that they may no longer may be sufficiently remunerated from the fund (a MySuper restriction). Employers need to talk to their adviser about continuation of services
Employees will be confused, so a communication program will be required in advance of the introduction of MySuper. A corporate super specialist adviser should be able to assist.
At this stage the government has not offered any awareness programme leaving the onus of communication with the employer.
What about employees?
Employees will be affected in a number of ways:
Their super balances will be split between two investment options; the current default investment strategy and MySuper. This may be confusing to them as they have not made an investment choice
MySuper may have a different investment strategy to how they are currently invested and hence a different investment return
If the employee takes no action then at some point before 1 July 2017 all monies in the fund will be transferred to MySuper automatically
Time is running short. Employers need to address the issue of MySuper now. In addition to MySuper, the Fair Work Act will greatly affect which default super fund can be used going forward. But that’s a story for another time.
About the author
Douglas Latto is the President, Corporate Super Specialist Alliance (CSSA). The CSSA represents corporate superannuation specialist advisory businesses. CSSA members provide financial advisory services to thousands of corporate superannuation funds across metropolitan and regional Australia and play an essential role in managing Australia’s large and growing superannuation savings pool.