A new law is empowering employees to choose their own superannuation fund, lifting restrictions that forced some members into a super fund dictated by their employer.
The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 passed overnight to give about 800,000 employees the choice which superannuation fund their retirement savings should be invested.
New workers who were previously restricted to a super fund as a result of an enterprise agreement for example, now have the opportunity to choose their own superannuation fund.
An employee will be able to choose their own superannuation fund where they are employed under a workplace determination or enterprise agreement that is made on or after 1 July 2020, the explanatory memorandum reads.
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New employees must now be provided with a standard choice form; if they do not choose a fund then the default fund arrangements apply.
"An employer does not have to provide existing employees with a form unless requested once a new determination or agreement is made. Where there is no chosen fund for an existing employee, an employer that continues to make compulsory contributions for that employee with the same fund, in accordance with the previous determination or agreement, will comply with the choice of fund requirements," the memorandum said.
The bill addresses the findings of the Financial System Inquiry and the Productivity Commission Inquiry into superannuation, which found that denying choice of fund can discourage member engagement and lead to paying higher fees.
The Association of Superannuation Funds of Australia chief executive Martin Fahy welcomed the new law.
"Improvements in the efficiency of contributions processing (through the adoption of SuperStream) have made the right to exercise choice of fund easier and individuals should have the right to exercise choice unless there are special factors, such as employer and member rights and obligations in regard to defined benefit funds," he said.