ISA’s Chief Executive Officer David Whitley said: “Lost super is being gouged by the for-profit sector’s eligible rollover funds through high fees and low returns. On a small balance, these higher fees and lower returns will quickly reduce an account balance to zero”.
So how did this bizarre situation happen? Basically successive governments did nothing to enforce consolidation of accounts even when the name, date of birth and addresses were known. The argument went that perhaps the member wished to have a number of accounts with the associated insurance benefits. Also, the problem posed an administrative nightmare.
It should be noted that these extra accounts came about as fund members changed their address without notifying their superannuation provider. As a rule, if two pieces of correspondence were returned to a super fund, it ceased sending further correspondence and the member became ‘lost’. This measure was obviously put in place to prevent the wastage of other members’ money on postage expenses. So as members moved house or changed jobs and switched to another fund, millions of inactive accounts were established.
But now, legislation is proposed that will enable eligible roll-over funds to consolidate inactive accounts (accounts into which no contributions have been made for one year) into active accounts. If passed, this measure would allow for the consolidation of accounts so that extra administration fees are reduced and balances would be put in the one ‘bucket’ without the red tape required to enforce a transfer of funds.
Currently the ‘lost member’ threshold is an account balance of $2000 or less which means inactive accounts under this amount can be transferred to the Australian Tax Office. In the 2015 – 2016 Budget Cutting Red Tape – Lost and Unclaimed Superannuation it was announced (at last) that the current threshold will move up incrementally to $4000 on 31 December 2015, and then to $6000 from 31 December 2016. This means that thousands (if not millions) of inactive accounts under the above limits will be transferred to the ATO in the hope of ensuring that they are reunited with their owners.
This is a major ‘cleaning up’ initiative that will close many dormant accounts and consolidate members’ superannuation savings. It’s a common sense measure aimed to redress the apathy problem and to shift inactive accounts into the larger, active ones.
So what can you do if you are ‘lost’? The ATO has made it quite easy to be ‘found’ again. You can either contact Mr Google for ‘lost super’ or go directly to the Australian Tax Office homepage (www.ato.gov.au/superseeker) and run a search for your lost super. If you prefer to phone, the number is 13 28 65. The only information you will need to provide is your name, date of birth and tax file number. Now is an excellent time to consolidate your accounts and it will save you fees in the long run. I tried it with mine and would say it was easy (I didn’t have any) and amazingly graceful!