Back in the 1980s, when Australia’s compulsory superannuation system was born, it was quite common for people to work for one company across their entire careers. Fast-forward three decades, and that notion is pretty mind-boggling, since today the average Australian worker could have up to a dozen or more job changes – and this is particularly so amongst Millennials. One effect of all those job changes is the potential to accumulate multiple superannuation accounts, especially when an employee simply ticks the box for their new company’s default super fund. And to be fair, how many of us in our 20s really took much notice of super?
So, while the employment landscape has changed dramatically, the superannuation environment hasn’t really kept up, and it’s why the Commonwealth Government recently announced a new concept: super stapling.
Ever since it was mentioned back in June 2021, businesses were given until 1 November this year to get up to speed with what super stapling means for employers. But for employees, especially those new to the workforce, the concept can be a bit murky. So, to help explain what it means for employees, it’s handy to go back a step and explain how we got here.
Super accounts prior to 1 November 2021
Back in the ‘old’ days (not actually that long ago at all), whenever a person started working for a new company, they’d have to either nominate the fund they wanted their super paid into, or leave it up to the employer to sign them up to a default fund. While many employees were on top of their super details, a lot (possibly the majority) were not and simply chose ‘option B’ out of convenience. This meant that a person who’d changed jobs a few times could start to have multiple super accounts, most of which would be sitting idle, earning minimal returns, but still charging them fees, and in some cases ultimately running their super balance down to zero.
But isn’t diversity a good thing?
Yes and no. Within your super account, it can be hugely beneficial, but across super accounts, it’s not, because every super fund charges fees, and so the more super accounts you have, the more fees you’re likely to be paying, while getting very little, if anything in return.
So how does super stapling help?
As its name suggests, super stapling is all about ‘stapling’ one super account to you for life, and you take it with you when you change jobs.
Since 1 November 2021, employers have been required to provide new staff members with a ‘Standard Choice’ of fund form. There are then three scenarios:
- The employee nominates their preferred fund, which becomes their stapled fund.
- If the employee doesn’t nominate a preferred fund, the employer checks the ATO’s database to see if the new staff member already has a stapled fund. If they do, the company pays the super into that account.
- If the employee doesn’t already have a stapled fund, then their super is paid into the business’s default fund, and that becomes the employee’s stapled fund.
It all tries to ensure that someone who changes jobs doesn’t end up with multiple, fee-charging super accounts.
Can someone change their stapled fund?
Yes they can. If you decide you want to roll your super into a different account, your new fund can pretty much do it all for you just by contacting them, but you must remember to tell your employer that your stapled fund has changed.
It’s also worth noting that if you already have a number of super accounts, it’s almost always a good idea to consolidate them into one account to avoid paying multiple fees. Super stapling does not consolidate funds, it simply earmarks one fund for all future super payments.
After 1 November, your most recent active account will automatically become your stapled account.
If you need advice about super stapling or consolidating your accounts, have a chat to your main super fund. Often they can even help you find any lost or unknown super and roll it into your stapled account, thus saving you fees and helping to grow your retirement income.