Money
Issue No. 20 - December/January 2005
How Super Fund Choice Affects you
by Tony Catt
Treat the introduction of superannuation fund choice from July 2005 as both an opportunity and a possible hazard.
The opportunity is for employees to leave any high-cost, low-performing funds chosen by their employers. The danger is that they may be drawn out, perhaps by slick advertising, of solid-performing, low-cost funds.
This is definitely a time to gain unbiased, quality financial planning advice before you make a decision to move to a different fund or stay with your existing one. Fund choice is perhaps the greatest change to the superannuation system since the Hawke Government introduced compulsory employer contributions in 1992.
Under the choice-of-fund legislation, employees will have the right to choose which super fund receives their employers' compulsory super contributions.
Under existing law, only employers can select the super fund that receives superannuation guarantee contributions.
The choice-of-fund legislation does not give employees the power to transfer their existing super balances to the funds of their choice. However the portability of superannuation regulations, in effect from July 2004, allows employees to transfer their super savings to the fund of their choice if their existing funds no longer receive contributions.
This means members can just direct their employers to make compulsory contributions to a different fund under fund choice and then transfer their super balances to the new fund under the portability regulations.
Significantly, the choice legislation does not cover salary-sacrificed contributions. However, an employer would be most unlikely to insist that salary-sacrificed contributions be made into a different fund than the one receiving compulsory contributions for an employee.
What if an employee does not select a super fund once choice is introduced? An employer will continue to make compulsory employer contributions to the same fund as in the past. This fund...
