Australia’s retirement system requires compulsory regular payments by your employer into your superannuation fund.
In this episode of the Settlement Guide we’ll look at how to find out if you have lost super and how to recover it.
Also, what happens to your retirement funds if you move overseas or in the event of death?
Superannuation, or 'super', is money put aside by your employer over your working life for you to live on when you retire from work.
It is compulsory for your employer to pay a percentage of your earnings into your super account, and your super fund invests the money until you retire.
In Australia, there are measures to ensure that individuals don’t irreversibly lose their superannuation savings, even if an account has been inactive.
If your contact details have changed and the provider is unable to reach you, they are required to transfer the unclaimed super fund to the Australian Taxation Office (ATO).
ATO’s Deputy Commissioner Emma Rosenzweig Pronounced r-OH-z-uh-n-z-w-ay-g explains what is considered lost super and what happens to it.
“Lost super is super money that's held by superannuation funds, where the fund has lost contact with you and your account’s been inactive. So, it hasn't been receiving contributions. Super funds will hang on to that lost super until they find you. But they do report it to us so that we can try and help you find it through ATO online services as well. If they can't find you, then some lost super has to be transferred to us.”
Once the ATO holds unclaimed super the agency takes steps to reunite the money with its rightful owner.
If you think you have lost super, it is best to search for it through the ATO’s online services.
It is essential to keep your contact details up-to-date, Emma Rosenzweig suggests.
“If people do think that they've got some lost super or that we might be holding super money for them and you can't find it in ATO online, it might be that we haven't got all your details or information. So, something people can do is to contact any previous funds they think they've held accounts with and make sure that all their contact details and bank account details in ATO online services are as up to date as possible.”
Xavier O’Halloran is the Director of Super Consumers Australia, an independent consumer advocacy organisation.
He says having multiple superannuation accounts is common -- and consolidating them into one is likely in your best interest.
“The estimates are that it'll reduce your retirement savings by about $50,000 if you have multiple accounts. So, it really does pay to keep on top of where your super is and consolidate where it's appropriate. The reason why this $50,000 reduction in retirement savings occurs for having multiple accounts is largely down to insurance, you end up having default insurance cover in more than one account. There are also fixed fees in these accounts. And you basically, again, are paying double if you keep more than one account open.”
Anyone on a temporary visa earning super while working in Australia, can claim that money back once they have left the country.
You can start your application for the Departing Australia Superannuation Payment (DASP) while you are in the country.
But you cannot complete it until your visa expires or has been cancelled. Ms Rosenzweig explains.
“And that allows you to claim that superannuation back from the fund that holds it once you've left the country. If you don't do that within six months of either leaving Australia or your visa expiring, then the ATO lets your fund know and that money transfers to the ATO as unclaimed super. So, it's still owned by you, you still can claim it from us, but the ATO holds it rather than your fund.”
If you’re an Australian citizen or a permanent resident, moving overseas does not change the rules around how your superannuation is treated, Emma Rosenzweig reminds.
“Permanent residents or Australian citizens can only access their super in normal circumstances. So, you have to have reached your preservation age, and you have to meet a condition of release. That applies even if you'd left Australia. So, you can't access your super early except in really limited circumstances, like severe financial hardship or needing to access your funds for critical medical treatment that's not covered by Medicare, those sorts of things.”
Mr O’Halloran says there are simple things you can do to best manage your superannuation while overseas, like keeping your contact details up-to-date.
He also suggests people keep across their fund’s performance and features.
“It's good time to check in to see if you're in a high performing fund. The ATO again has a really good resource to help you out with that, called the YourSuper comparison tool, which allows you to compare a lot of the basic products on the market by the fees and performance that they deliver. Also, worthwhile checking with your super fund as to whether your insurance will protect you while you're working overseas, too. A lot of people don't realise that they've got insurance by default in their super fund. So, ask your fund whether that will continue to protect you.”
He also urges to check you're not paying for any unnecessary fees, and continue making contributions.
“The average fee on the market, if you've got about a $50,000 balance would be about one per cent per annum that you'd be paying out each year in fees. There are definitely offers on the market that are a lot less than that, that are closer to half a percent. So, it's worth shopping around to make sure that you're in a really low fee account and your savings aren't eroded while you're overseas. And of course, you can look to continue to contribute to make sure that your retirement savings continue to grow, even if you've moved to another country.”
It is also best practice to nominate your super beneficiaries in the event of death. If your family circumstances change, you can also adjust your beneficiaries' list, and what percentage you leave to who.
Complaints relating to the distribution of super death benefits are dealt with by the designated statutory body, the Australian Financial Complaints Authority AFCA.
Heather Gray is the Lead Ombudsman for Superannuation at AFCA. She says a common misconception is thinking super is part of your estate by default.
“People often don't realise that the superannuation money is not part of the estate. It's important for people to consider when they pass away, who should receive their superannuation death benefit. Because for a lot of people, it's their most significant asset, perhaps after the family home. And people might consider their estate more generally, and maybe make a will, but they won't necessarily get advice and make arrangements for their superannuation.”
When trustees are communicating what they’re proposing to do with a super death benefit, they are obliged to inform concerned parties they can contact AFCA within 28 days to appeal the decision if they believe it’s unfair.
The decision is then assessed, and a binding determination on the complaint is issued.
Ms Gray says complaints often arise over a trustee’s decision.
“People have got complex family situations. So perhaps they do have children from more than one relationship. Maybe they've got a legal spouse, but they're separated from that spouse, and they've also now got a de facto spouse, maybe if they've got young children from that new relationship. If they were able to spend some time considering how their superannuation should be distributed, and put that document in place with the fund, that can mean that a lot of arguments are resolved.”
This involves lodging a binding nomination of beneficiaries, Heather Gray explains.
“And most funds allow you to make a binding nomination. So, that's a legal document, which sets out who you want to receive your superannuation if you die. And then as long as it's valid, and you've nominated people who are actually dependents for superannuation law purposes, the trustee has to abide by it.”
The form of the benefit payment, and who it is paid to, will depend on the governing rules of your fund and the relevant requirements of the Superannuation Industry (Supervision) Regulations 1994 (SISR).
You can pay the deceased's dependants as either or both: a super income stream or a lump sum.
You can pay the deceased's non-dependants only a lump sum.
