The Federal Government is introducing legislation to prevent fee erosion of lost super accounts with balances under $6,000 stating that they are committed to “ensuring that Australians have adequate retirement savings.”
Assistant Treasurer, Mr Josh Frydenberg has said that the amendment would increase the threshold at which funds would be transferred to the Australian Tax Office (ATO) as unclaimed super funds, from $2,000 currently to $6,000 over the coming 16 months.
For smaller funds, it’s often the case that fees, charges and insurance premiums exceed the investment returns. It’s a problem for lost super, as often the members are unaware that they have the accounts and could easily end up losing money earmarked for retirement. Transferring lost super accounts with low balances to the ATO can help protect these accounts from fee erosion, and preserve value until they can be reunited with the members.
The trouble is, if the member had established the fund for the express purpose of funding insurance premiums for death, total disablement or income protection, this valuable cover can be lost on transfer, meaning the client loses their insurance protection but maintains a small superannuation balance. Hardly the desired outcome in the event of the need to claim – and also highlighting the need to stay on top of our super funds and in touch with our providers!
Currently, lost member accounts with a balance under $2,000 must be transferred from fund managers to the ATO as unclaimed super.
The new Bill is set to increase the $2,000 balance in two separate phases. Firstly to $4,000 from 31 December, 2015 and then to $6,000 from 30 December, 2016.
Time to do a check on your funds to make sure you’ve rounded up all those smaller accounts!
If you think you may have lost Super, click here to run a no cost search: SuperSeeker