A. What to consider as an employer
Many modern super funds offer members numerous choices of investment, insurance, advice and other services. The choices available are so extensive that there is almost nothing an investor could want that can't be found in a modern superannuation fund.
But what if you are one of the millions of Australians who, while you understand why superannuation is important, just want a simple no-nonsense super fund that won't force you to make decisions about investment and insurance options?
This is why the government in 2013 introduced MySuper, a system that allows superannuation funds to offer products that are much simpler than the main funds many members were used to dealing with. The essence of MySuper products is that they contain just one investment choice and a standard cover insurance arrangement rather than regular funds that offer dozens of investment and insurance choices.
MySuper products have other advantages too: as simpler products they should have lower fees. And as simpler products their Product Disclosure Statements should be simpler than those for regular funds. MySuper products simplify superannuation funds but they do not dumb it down. They will still offer financial advice which will be paid for by the fees the members already pay.
Where an eligible employee has not exercised choice of fund, the employer must pay their SG contributions to an eligible default super fund. Contributions that are directed to a fund other than either an employee's chosen fund or the employer's default fund will not count towards meeting an employer's SG obligations.
Even if all existing employees have exercised choice of fund an employer needs to have an eligible default fund in case any contributions are returned to the employer. Additionally, the employer must state the name and other required details of its default fund on the standard choice form it must give to every new employee within 28 days of employment commencing.
|Note: MySuper is what we call the default super product most employers use for compulsory superannuation contributions. They are simplified superannuation products containing:
As simpler super products they usually have lower fees and are easier to compare
How MySuper works
MySuper products have only one investment choice and one standard insurance choice. As they are less complex than regular super funds they are generally cheaper; normal super funds can cost up to 2% per year but MySuper products can be half price or even cheaper. The cheapest MySuper products can have fees as low as 0.6%.
But there is some fine print:
- MySuper products are only available through employers (ie they are workplace funds);
- only MySuper products can be default funds on industrial awards; and
- only MySuper products can accept default SG contributions paid by employers for their employees.
Employees who don't want to use their employer's default MySuper product should use the Super Choice provisions to choose another fund.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.
Last modified: Tuesday, April 27, 2021