In a submission to Treasury on the government’s proposed amendments to FOFA, the CSSA warned that members could end up with higher fees, a vastly changed investment strategy and the loss of insurance rights.
“Many superannuation funds, in fact the vast majority of retail funds, have a new investment strategy that could result in vastly different outcomes for fund members upon transition,” said the submission.
The CSSA went on to list examples where a provider’s MySuper option is more conservatively invested than its original default option – something that could “potentially reduce longer-term investment returns for investors”.
“Contrary to what some industry commentators would have us believe, many superannuation fund members have made a conscious decision to join or remain invested in their employer’s default investment option. Members regularly tell us this,” the submission stated.
Insurance is another “major concern” for the CSSA.
“We are very concerned that the transition of members from one superannuation fund to another will result in either a loss of insurance cover or in an increase in insurance premiums,” the submission said.
The CSSA has also seen instances where fees have increased under MySuper since the negotiated fee in the existing employer default account is lower that the new MySuper default.
“It seems unfair to compulsorily transition accrued default members to a higher fee environment,” the submission said.
Totally agree with CSSA comments. Recently we had a fund where we agreed with the employer to pay a fee and tried to remove commission from the insurance structure. We were advised by the product provider that the insurance cost would have gone up for all members even with 0 commission. This was caused by plan alteration causing all embers to default to new rates applicable under their MySuper offering.