On September 21, the government unveiled the details of its Stronger Super reforms to the nearly 20‑year-old superannuation system, consisting of mandatory employer contributions to private pensions or retirement savings accounts. Stronger Super is based on the July 2010 recommendations of the Super System Review panel, also known as the Cooper Review. To address the issues of the superannuation system, the government will introduce the Stronger Super reforms to Parliament in stages.

According to the Cooper Review, the current regulatory infrastructure of the superannuation industry is too complex and costly for most workers; the fees associated with the funds disproportionately affect smaller accounts. As a result, about 80 per cent of Australian workers do not actively choose a fund and are placed in a default superannuation fund designated by their employer. In addition, the industry has no standards for producing data and no uniform systems for processing contributions and identifying members. Another issue is the number of inactive, unidentified or "lost" accounts. Currently, each worker has an average of three superannuation accounts, and one-in-two working Australians has an unidentified or lost member account, which amounts to some AUD 13.6 billion (USD 13.2 billion) in total assets. (A member is anyone with a superannuation account.)

A key provision of the government's plan is the introduction of MySuper-a simple, low-cost superannuation product with a standard set of fees and a single diversified investment strategy-to replace the default funds. Employers would be permitted to negotiate a discounted administrative fee for their employees. Beginning October 1, 2013, employees who do not make a choice would be placed in a fund that offers a MySuper product. All existing default accounts would have to be transferred to a MySuper product by July 1, 2017. In addition, regulated superannuation funds would be required to offer life insurance and total and permanent disability insurance with an opt-out provision. MySuper products would have to provide a standard level of insurance coverage; its members would also have the ability to either increase or decrease coverage.

A major part of the reform (called SuperStream) aims to improve the administration of superannuation accounts. Those measures include establishing industry-wide standards to improve the quality of data, using e-commerce, adopting the worker tax-file number as the identifier for the entire system, simplifying administrative processes, and eliminating duplication. Data and e-commerce standards would apply to superannuation funds on July 1, 2013, and be extended to large and medium-sized employers 1 year later. The government's goal is to incorporate small employers by July 1, 2015, but implementation details for small employers have not yet been established. Other provisions of the reform include-

- Consolidating multiple accounts. Beginning in 2014, lost and inactive accounts-no contributions or rollover within the past 2 years-with balances of less than AUD 1,000 (USD 974) in eligible rollover funds would be consolidated into the member's current active account unless the member opts out.

- Improving oversight powers of the superannuation industry for the Australian Prudential Regulation Authority, the Australian Securities and Investment Commission, and the Australian Taxation Office.

Source: "Australia," International Update, May 2010 and January 2011, US Social Security Administration; Assistant Treasurer and Minister for Financial Services and Superannuation Press Release No. 131, September 21, 2011; "Stronger Super Information Pack," 21 September 2011, Australian Government.

Publication date: 09.2011