Australians are notorious for having multiple superannuation accounts.
As at May 2021, the Association of Superannuation Funds of Australia (AFSA) stated there were 24.4 million individual superannuation accounts held by Australians.
People have multiple superannuation accounts either by design or by accident.
Just think about it, every time we change jobs, and our new employer asks for our superannuation fund details so they can make compulsory contributions, if we don’t have those details at hand, our new employer will make contributions to their “default” fund, thereby resulting in a new account being opened.
Of course, if we only have a modest amount in super, details of our super fund are not going to be at the forefront of our mind and may be difficult to locate at short notice.
As a result, many Australians have ended up with multiple, often small superannuation accounts. Sadly, these account balances are eroded over time to a point where, after fees, charges, and insurance premiums are deducted, nothing is left and the account is closed.
However, there will be occasions where having more than one superannuation account will intentional. Where an individual wishes to:
- hold stand-alone insurance through super,
- segregate their taxable and tax-free components for estate planning purposes,
- draw a pension while also continuing to contribute, or
- hold money in the superannuation system even though they have reached their transfer balance cap, maintaining multiple superannuation accounts will be appropriate.
A couple of years back I assisted a financial adviser who had a young(ish) client that had six or seven different superannuation accounts. None of the accounts had a significant balance but most had insurance attaching to the account.
Sadly, the member suffered a medical condition that resulted in them becoming totally and permanently disabled.
As a result, the insurance benefits payable from each account were significantly higher than would have been received if the member had only one superannuation account. This was a situation when having multiple accounts fortuitously benefited the individual.
One of the inherent risks of having multiple superannuation accounts is the risk the accounts will become “lost”.
Just picture this – you have multiple superannuation accounts with different super funds opened because you have changed jobs a few times. You then move house and forget to advise your various superannuation funds of your new address. As a result, your super funds lose contact with you.
When a super fund has a lost member, they are required to transfer the lost account to the Australian Taxation Office (ATO). The ATO will then attempt to reunite the lost member with their lost superannuation.
The government-run campaign of reuniting members with their lost super has been quite successful, with around 13 million duplicate accounts having been closed or consolidated, over the course of the past few years.
However, there are still many duplicate accounts in existence.
Having multiple accounts can result in duplication of fees and charges.
Unless having multiple accounts is intentional, for reasons mentioned earlier, consolidating super can have tangible benefits.
Looking for lost super and consolidating multiple accounts can be done quite simply by checking the superannuation tab in your my.Gov account. Many superannuation funds will also be quick to offer to assist with consolidating accounts – to their fund, of course!
However, before consolidating super it is important to speak with your financial adviser to ensure consolidation is in your best interest. Importantly, consolidating super may result in the loss of valuable insurance cover.
In the future, the risk of multiple superannuation accounts arising from changing jobs is likely to diminish as recent legislation has been introduced that will require employers to make contributions for new employees to an existing superannuation account held by the employee, rather than simply contributing to the employer’s default account.
How many superannuation accounts do you have?
PK believes people have the right to accurate, affordable and unbiased information that addresses all aspects of their preferred retirement lifestyle, thereby giving them the opportunity to make informed decisions that will empower them to live out their lives with dignity, certainty and security.
Tealey’s ambition is to change how people think about their retirement, he wants people to dream, plan and realise retirement is not defined by a magical age prescribed by the legislation.