Lost Members’ Week (LMW) is generating a lot of excitement as an industry initiative, tempered by a sense of realism about the extent of its capabilities.
The hope is the LMW will leave a significant dent in the total number of lost member accounts, and in doing so, help to improve the mindset towards superannuation among the public, the industry and at government level.
It’s a mindset that, according to the Australian Taxation Office (ATO), lets around 500,000 accounts get ‘lost’ each year. The total value of lost accounts currently stands at $6.1 billion, representing 4.2 million lost accounts held by 3.2 million individuals.
Chris Casey, the ATO’s assistant commissioner — superannuation, describes the LMW as an “inspired one-off hit that will reunite a lot of people with their lost money and encourage best practice techniques by industry to prevent accounts becoming lost”.
Casey says personally, he will consider the LMW a success if it results in a “change in mindset by super funds towards the ATO’s SuperMatch system. He believes the system has the potential to “largely solve the lost members problem if industry embraces it”.
Introduced in March last year, SuperMatch offers funds free access via the Internet to the ATO’s Lost Members’ Register, which contains the 4.2 million lost accounts. It enables a fund to send a member’s details to the ATO, which then matches the data against the Lost Members’ Register. The ATO then contacts the fund with a list of possible hits, which, in turn, advises the member to roll them over into his or her current account.
Casey cherishes the “utopian notion of a world in which every fund registers every new member with SuperMatch”. “This would strangle the burgeoning annual growth in lost accounts and also help reduce the total number of existing lost accounts,” he says.
In reality, however, the industry has been slow to embrace SuperMatch. “Only 200 of our target audience of about 2,000 non self-managed funds are using it, although, to be fair, the system has experienced a teething glitch, which has now been ironed out,” says Casey.
“The industry funds, in general, have been quick to use SuperMatch. On the other hand, the response from the profit funds has been very poor overall. It seems lost member accounts are not a high priority for these funds, perhaps because an administrative cost is involved, although SuperMatch itself is a free service.”
Australian Preservation Fund (APF) executive officer David Haynes is urging the industry to “throw its support” behind the LMW, of which the APF is a sponsor. “The growth in lost members can only be arrested by the commitment and determination of industry.”
Haynes’ confidence that the LMW will “yield a tremendous result” is borne-out by the results of a database cross-matching exercise done in June by APF, Australia’s largest eligible rollover fund, to track down lost members for its participating funds.
He says more than $50 million in lost super money belonging to 127,000 fund members was found in the exercise, which involved accessing the ATO’s Lost Members’ Register, as well as other databases. It followed a similar exercise that ended in January, which saw the APF locate 150,000 lost members and transfer more than $24 million into members’ active accounts.
Haynes says the APF is currently promoting these results to hundreds of funds, to encourage them to nominate the APF as their elligible rollover fund.
“There’s a benefit to the funds in lower member protection costs from fewer lost accounts, while their members earn higher interest from the consolidation of their super accounts,” he says.
Susan Ryan, president of Australian Institute of Superannuation Trustees (AIST), says: “The LMW has struck a resonant chord with trustees, particularly of the big industry funds, all of whom are anxious to see an improvement in the lost member situation.”
Ryan is hopeful the LMW will encourage “all trustees to revisit the best practice guidelines” the AIST has been circulating in a report on lost members it released late last year.
“We’ll survey trustees on their use of the guidelines next year, after the big education campaign that the LMW represents has had a chance to work its way through the industry,” she says.
The AIST report also recommended some policy changes to prevent accounts getting ‘lost’, at least one of which, Ryan is happy to report, was adopted by the Federal Government in its super amendments in the recent Budget.
“The Government committed itself to quarterly rather than annual mandating of employer contributions, for which the AIST has been lobbying strongly. This will go a long way to reducing the high number of lost accounts among the ever-growing casual workforce.
“Unfortunately, it also amended the assessment for super eligibility from monthly to quarterly,” Ryan says. “It moves SG eligibility from its current $450 a month to $1,350 for three months, which will not help the lost member cause.”
