Workers should have access to a choice of superannuation funds to allow them to make contributions to the same fund throughout their working lives, irrespective of industrial agreements and awards, according to the Association of Financial Advisers (AFA).
In a submission lodged with the Treasury responding to the Government’s choice of fund legislation, the AFA said it held the view that employees should have the right to choose their own fund, and to retain that fund as they progressed through their working life.
“More particularly we recognise that the lack of choice has a detrimental impact in a number of different scenarios, including the following:
- Employees with two or more part-time jobs that are covered under an enterprise agreement where they would be forced to contribute to separate funds and pay fees to each fund;
- Situations where an employee has moved from one employer to another and is forced to commence contributing to a new fund. It may be in the best interests of the employee to continue paying into the previous fund. One example would be where they have insurance in the old fund that they do not want to give up. This might include circumstances where they have implemented tailored insurance arrangements that may have been put in place as a result of financial advice and required medical underwriting. It may also be the case that the previous fund provides better terms and more suitable investment options than the new fund;
- Another situation might arise where the employee was previously self-employed and had set up their own SMSF [self-managed superannuation fund], which they want to retain and don’t want their contributions to go into a new fund.”
The AFA submission said that to address the scenario where people had multiple funds, employees needed to roll-over funds from one of their funds to another.
“This takes time and effort and often this is left undone. As a result, it is very common for people to have multiple funds and they often end out paying not only multiple fees but also multiple insurance premiums. This can also lead to lost accounts and contributes to issues with members being disengaged from their superannuation,” the submission said.
“Whilst being employed under an enterprise agreement may mean employees have access to a default fund, it is beneficial for them to also have the opportunity to choose their own fund. This simply gives them choice and does not remove their options.”
