The Federal Government has been warned that changes to the rules around unclaimed superannuation money could have significant adverse and unintended consequences.
The Association of Superannuation Funds of Australia (ASFA) has used its submission to Treasury on the Superannuation Laws Amendment (unclaimed Superannuation Money) Regulation 2015 to express its deep concern about the possible consequences of implementing the changes.
The ASFA submission said that the organisation was “of the opinion that elements of the draft Regulation are likely to result in unintended adverse consequences for members including the arbitrary loss of investment returns and insurance arrangements”.
“There will also be an increase in administrative expense and complexity and red tape for superannuation funds to identify members as lost inactive, contrary to the direction provided by the member,” it said.
The submission noted that, on a separate matter, ASFA had written to the Assistant Treasurer “expressing our deep concern with the potential adverse impacts of the proposed increase in the small account balance thresholds — in particular the likely lose of insurance coverage that this is likely to cause”.
The ASFA submission makes clear the organisation has particular issues with moves within the proposed legislation which risked labelling public offer choice members as inactive or lost when they are not.
“For a number of reasons we strongly oppose this measure,” the submission said
“‘Public offer’ members have made an active decision to become members of a fund and will have been required to complete an ‘eligible application’ (attached to or accompanying a Product Disclosure Statement) to do so.”
The submission said the fact that the members had not made a contribution or rollover in a five year period should not necessarily indicate that were ‘lost’ according to the common usage of that term.
It said this was because there might be good reasons why no contributions or rollovers had been made in that period. For example: the member may wish to maintain a balance in an ‘inactive’ fund to retain insurance cover or a particular investment allocation, or in preparation for transition to retirement.
“In addition, it is important to recognise that not all members will receive or make contributions on a regular basis — for example, contributions may be irregular for the self-employed or for people who have irregular patterns of work,” the submission said.
“Reporting these accounts as lost is of no benefit to the members and could actually adversely affect them due to inappropriate classification as ‘lost’ resulting in transfer to the ATO.”
The submission said that such detriment might include loss of investment returns and insurance arrangements and warned that it was foreseeable that members might seek recourse from trustees or the government to ‘make good’ this loss.
