Several changes are coming into effect with superannuation starting on 1 July 2021. This blog will outline what these changes are and how they affect you.
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Several changes are coming into effect with superannuation starting on 1 July 2021. This was announced by the Federal Budget and is designed to make it easier to keep your superannuation account when changing jobs, know what super funds are underperforming, and receive information about what investments each fund is making. Obviously, superannuation is an ever-evolving topic and so it is essential for each person to stay up to date with what’s going on with their super to achieve the best outcomes for their account. With that in mind here are some of the key changes to be aware of.
The Federal Budget announced that the super guarantee is set to increase from 9.5% to 10% on the 1st July 2021. However, the government is yet to officially commit to this increase as of yet, but this is set to be determined on the next federal budget in May 2021. The super guarantee determines the percentage of wages that an employer has to contribute to each employee’s super account. A higher super guarantee means more savings at retirement. The super guarantee has been frozen since 2014 and this increase will leave Australians with bigger super balances when they retire.
According to the treasury, from 1 July 2021, workers will automatically keep their super fund when they change jobs, meaning that the super is ‘stapled’ to them. This should stop the creation of multiple super accounts and so save time and money for each employee. Currently, while each person can choose their super, often when they change jobs the new employer will already have a preferred superannuation provider, and thus set the employee up with the default super account with the new company. This means that employees often have multiple superannuation accounts, which means multiple fees, taxes, and minimal savings. From July 1 2021, the new rules will be:
It should be noted that this new change will mean that individuals may be left with super insurance that insufficiently covers them in their current occupation. What’s My Claim Worth recommends that super account holders check their super fund insurance policy to ensure that it is appropriate for them and their needs.
Super funds will now be tested and benchmarked for performance under the new policies outlined to come into place from July 1 2021. The aim of these new policies is to encourage better fund performance.
Under these new policies, funds that are 0.5% below the benchmark will fail the test. Two failed tests in a year will result in members being notified of the failure and the superannuation fund being put on hold to accept any new members. These new changes hope to enable customers to track their super performance, as well as reduce the number of people in underperforming funds.
It is now more important than ever to make sure your super fund has life insurance and policies that will meet your needs and are appropriate for your occupation. Your super fund will now follow you between jobs for your entire career, so it is essential for you, your wellbeing, and your retirement that you now take special care and consideration into researching and keeping up to fate with policies.
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