Superannuation

A Summary of "Super Choice" Legislation - 2005

On 1 July, 2005 nearly five million working Australians will become eligible to elect where their employer pays their current 9 per cent superannuation guarantee contributions. Generally, all Australian employees must be offered “Super Choice”, with the relatively few exceptions mentioned below:

• Employees covered by an Australian Workplace Agreement or a certified agreement under the Workplace Relations Act 1966, or a certified agreement under the Industrial Relations Act 1988, or certain employment agreements made under Victorian Employee Relations Act 1992
• Employees covered by a State Industrial award
• Employees who are unfunded public sector scheme members
• Special rules exist for members of defined benefit funds
• Special rules will apply to Commonwealth employees who are members of the CSS or the PSS

Note that that the Super Choice legislation doesn't mean you must act and therefore make a choice; and it also doesn't mean a choice must be made on 1 July.  You will also have the option to change funds made available every 12 months.

Indeed, it may be in your best interests to keep your existing super arrangements as your super fund may already provide you with all of the products, features (eg insurance) and investment options and returns you require from a fund.  There will inevitably be a lot of marketing energy expended by various funds in Australia trying to elicit new members – their claims and the net benefit of any shift in funds needs to be considered carefully.

Inertia, and innate conservatism, have led many commentators to suggest that the number of individuals who will shift funds initially will in fact be relatively small – however, the legislation will hopefully improve service and competition (in fees) within the industry.  It also provides people, who have multiple accounts generating multiple fees, to consolidate into one preferred account.

In summary, the choices available are:

1. remain with your existing fund;
2. change to another fund;
3. set up a 'Do It Yourself' (DIY) fund; or
4. make no choice and have your contributions paid into an eligible choice fund selected by your employer (this may be your existing employer sponsored superannuation fund).

If you are eligible for Choice, before 29 July 2005 your employer must provide you with a standard choice form. This form will allow you to nominate the super fund you wish your employer SG payments to be paid into.

As far as expatriates are concerned, there are a number who remain members of their Australian employer’s fund whilst overseas, often with no choice made available. We don’t believe this is always the optimal investment position, as we point out elsewhere, but it is better than maintaining no superannuation/savings vehicle. Unless your situation falls within the class of exceptions mentioned above, then you should be given a similar choice.  The problem is that you will be restricted – as a non-resident – from joining a number of Australian funds; although you can probably still establish a DIY fund as long as you meet trustee residency requirements.  Ideally, your employer should give you specific guidance on the choices in your circumstance or access to professional guidance – the position of expatriates, as usual, is more complicated than resident Australians.

Complete the Superannuation inquiry form