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ASFA warns unclaimed monies measure could produce 'merry-go-round of money'
The Association of Superannuation Funds of Australia (ASFA) has warned that raising the unclaimed small account balance threshold from $200 to $2000 may result in a "merry-go-round" of money that has no benefit for anyone.
ASFA said the process could result in unnecessary costs for funds and the Australian Taxation Office (ATO).
The association said definitions for "uncontactable" and "lost" needed to be revisited, as the SIS regulations had been drawn up 20 years ago. Treating members as "uncontactable" because mail had been returned despite continued contributions to the fund was outdated, it said.
ASFA estimated over 1.5 million accounts could be adversely affected by the move unless a provision were included to exclude members that had contacted the fund within the last two years.
Super fund members could also lose insurance benefits under the new measures, ASFA said.
Insurance could be funded for years with a $2000 account balance and members could be left seriously under-insured if they lost insurance as a result of their super account being transferred to the Australian Taxation Office (ATO), according to ASFA.
In 2010-11, the super industry saw 60,000 exits due to potentially insurable events, which would indicate that under the new measures there could be in excess of 2000 account holders a year losing their insurance cover.
ASFA said ideally account balances with insurance should not be transferred to the ATO, given the unresolved issues with auto-consolidation and insurance.
The Government should take responsibility for informing members of the loss of insurance and associated consequences, ASFA said.
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