Super auto-consolidation proposal needs more detail

The detail is still lacking in the Federal Government’s superannuation auto-consolidation proposal says Ross Bowden, Executive Director for ING Employer Super, in the lead up to next week’s Federal Budget release.

“The Federal Government has flagged its intention to implement a system of automatic rollover to reduce lost super but is scant on the detail on how the system will proceed,” said Mr Bowden.

“Reducing the level of lost super is commendable, but the Government needs to be aware that several issues may complicate the roll-over process.”

ING Australia Employer Super research highlights a number of concerns that need to be covered before implementation.  These concerns include:

• Loss of insurance cover – the potential for members to be disadvantaged if their super is automatically consolidated into a fund with no insurance cover or cover cannot be obtained to the same level as held previously
• Investment strategy – similarly, a situation may arise where funds are consolidated into a single account which has an investment strategy not suitable for the member’s needs
• Estate planning - beneficiaries could be disadvantaged if the consolidated fund’s beneficiary nominations are not in alignment with the true wishes of the member   
• Anti-detriment payments – certain lump sum death payments qualify for a bonus amount of up to 17.65% and problems may arise if benefits are moved from funds that offer this service to a fund that doesn’t

“ING is hopeful that the Federal Government will address these issues and consult across all sectors of the superannuation industry before implementation of the scheme,” said Mr Bowden.

“The final proposal should also include a education progam that explains in simple language the importance of super consolidation and benefits this will accrue to members over the life of their superannuation savings.”