Super stapling is the new buzzword in superannuation circles (ooh, now there’s a circle we all want to be in). Here’s what the changes mean for you.
Some changes to superannuation have come into effect this month that may affect the way your super is managed.
Under the old ‘default’ superannuation system, if you started a new job and didn’t nominate a superannuation fund, your contributions were paid to your employer’s default super fund.
This meant that many people typically had more than one superannuation account; they’d change jobs a few times, collecting employer default funds along the way.
What’s super stapling?
Under the new ‘super stapling’ reforms, when you move jobs you bring your existing superannuation fund. So, your new employer will pay contributions into this ‘stapled fund’, not their own default super fund.
Super stapling basically means that you’ll keep your current super fund for life, unless you actively change to a different fund.
It’s linked to you, no matter who you work for or how many jobs you have. The ATO says that it’s introduced this change to “save you money on super account fees by stopping unintended super accounts from being opened every time you start a new job.”
While super stapling legislation will cut down on people having multiple super accounts, it’s more important than ever to check which fund you’re stapled to.
What if you have multiple accounts?
Quick pause here: if you currently have more than one super fund, stop it. Compare the funds you belong to at YourSuper, work out which one is giving you the best returns and move all of your super into that one fund. With most funds, this process is entirely online and automatic. Once you’ve got just the one super fund, you’ll stop paying multiple admin fees that suck money straight out of your retirement.
Holding multiple super accounts is a big problem for many. The ATO estimates that over 4 million people have more than one super account. Around 2 per cent of people currently have four or more accounts. That includes people who are at retirement age. But because you’ve taken the above steps to consolidate your super, you are not going to be one of them.
However, if you do happen to have more than one account, the ATO will apply what it calls ‘tie breaker’ rules to work out which super account to link you to.
The tie-breaker rules consider:
- whether we have previously identified an account as a stapled super fund
- how recently contributions have been made to each of the accounts
- the account balances
- how recently each of the accounts were created.
So, if you haven’t identified a super stapling account, the ATO will effectively staple you to your most recent super fund. So, don’t delay doing your homework and nominating your own super stapling account by only having one super fund.
Does your stapled fund stack up?
To ensure you’re being stapled to the right fund for you, SuperRatings Executive Director, Kirby Rappell recommends checking that your fund’s performance stacks up and fees are competitive. Both can have a significant impact on your final retirement account balance.
SuperRatings also suggests making sure the insurance cover offered by your stapled fund is suitable, as one of the benefits of default super accounts created with each employer was that insurance may have been tailored to the workplace. “If you are unsure what insurance cover is suitable for you, many funds provide insurance needs calculators that can help and also offer advice services,” says Rappell.
You’ll only notice super stapling at work if you change jobs. Until then, you’ll be in whatever super fund you nominated when you joined your current employer. Or whatever fund they put you in, which might be different to the fund your previous employer was paying into, or the employer before that or… Like I said, best to check you’re only in one super fund now, rather than later.