The Australian Government should slash red tape on super accounts in retirement to save tens of thousands of retirees from paying two sets of super fees - and give people greater flexibility to choose to continue working in retirement, the Super Members Council says.
A cumbersome rule forces Australians who want to pick up part-time work after they retire to open an additional account for their super contributions, rather than being able to make the payments straight into their retirement super accounts.
To make retirement simpler and more flexible, the Government should end the ban on receiving contributions from part-time work or other sources into their retirement (decumulation) phase account.
The Super Members Council estimates about 100,000 retirees would benefit from the change.
This outdated law adds an extra layer of red tape and complexity to retirement - and means some retirees are needlessly paying two sets of fees and often more tax than they need to.
Retirement is becoming increasingly fluid, with recent Super Members Council commissioned consumer research finding that one in four Australians continue to work into their early 70s.
“As more than 2.5 million Australians approach retirement in the next decade, the focus needs to be on making the system easier, simpler and allowing greater flexibility,” said Super Members Council CEO Misha Schubert.
“Increasingly, many Australians want to dip back into the workforce from time to time after they start their ‘capital R’ retirement. But instead of making that process easy, currently they must open a second super fund account, with the administrative hassle of transferring money across into their main retirement account, and they pay extra fees - and perhaps more tax - than they need to.”
“The easy fix is to legislate for Australians to be able to make super contributions from part time work and other sources straight into their retirement account. This simple red tape busting reform would make retirement easier and more flexible for tens of thousands of Australians.”
Deidentified data from a large SMC member fund shows that around one quarter of their members in retirement set up new accounts to accept contributions and then commute to a new retirement income account. Importantly, the number of members doing this is growing – up 45% between 2022 and 2023.
The change would require a minor legislative update to the Superannuation Industry Supervision Act and tweaks to associated regulations. SMC does not propose changes to the pre-tax super contribution settings.
To make retirement simpler while keeping flexibility to meet retirees’ needs, the Government should:
- Swiftly consult and legislate the retirement and super component of the financial advice reform package before the end of this year
- Make it easier for members to switch into retirement products – and end the current ban on being able to add contributions to a retirement-phase super account
- With member permission, the Government should notify super funds about their members eligibility for pensions and other government supports, so members can be given tailored information on how to maximise their retirement income
- A comprehensive retirement test for super products should be developed that measures a broad set of factors including investment performance, flexibility to access funds in retirement, and giving people control over the level of risk they want.
- The Government should not mandate the use of annuities for members or cohorts of members. Trustees are best placed to create investment strategies for their members.
About us:
A strong voice advocating for more than 11 million Australians who have more than $1.5 trillion in retirement savings managed by profit-to-member superannuation funds. The Super Members Council will protect and advance their interests through their lives, advocating on their behalf to ensure superannuation policy is stable, effective and equitable.
Contact details:
James Dowling: 0429 437 851, jdowling@smcaustralia.com