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(August-2003) Taking action against inactive accounts
Recently over dinner, during one of those conversations with my children about the meaning of life, the subject turned to what I do for a living and whether I had wasted my life doing it.
My children are aware of my involvement in a mysterious cargo cult called “superannuation” but they have little idea of its beliefs and purposes. However, they have enviously observed that as a result of being fully paid-up members of the cult, many “old people” (that is, those over 55 years of age) appear to gain access to a never ending supply of treasure which they spend while “waiting for God”.
It so happens that two of my children, aged 21 and 19 respectively, have had personal contact with the cult as they are unwilling members of not one, but several branches of it, holding membership of at least six separate superannuation funds between them.
The trustees of these and other large superannuation funds are only too well aware of the existence of millions of tiny inactive accounts owned by untraceable casual fruit pickers, coffee shop waiters and university students.
These accounts were established merely to comply with legislative and industrial award requirements.
With one notable exception, these accounts do no good for anyone. They are a costly pain in the neck for administrators, trustees and members alike. Active members are required to cross-subsidise them (there being a statutory limit on fees which may be charged) and the beneficial owners are usually not aware of their existence or don’t care about them because the account balances are so insignificant as to have difficulty in funding a Big Mac Meal with small French Fries.
It appears that the only winners out of this nonsense are the governments of Australia as “unclaimed monies”, reported to weigh-in at over $7 billion, eventually wind up in the hands of that well known accumulator of spare cash, “Consolidated Revenue”.
It is tempting to support a Federal government sponsored response to this problem which would lift the SGC monthly salary hurdle from $450 to $900. Perhaps it should be lifted even higher to a level which would ensure the contribution of meaningful amounts into accounts controlled by actively working people who are in receipt of at least Average Weekly Ordinary Time Earnings (AWOTE). Yet another proposal has been to lift the age of qualifying superannuants, to say, 25 years, below which superannuation guarantee contributions would be optional.
It is certainly a tempting solution to set a high bar, such as AWOTE and age 25, below which compulsory superannuation would not be required.
Perhaps the solution lies in specifically earmarking the unclaimed money and turning that ever-growing bucket into an untouchable National Superannuation Scheme for the provision of aged pensions and benefits to lower paid, part-time and casual workers whose disjointed working lives have precluded them from accumulating adequate entitlements on which to retire.
I envisage a hundred ideological and practical barriers to this suggestion. However, Australian governments will always need to provide a retirement safety net for the disadvantaged. At present, that safety need is substantially underfunded and its cost is growing at a frightening rate. Use of unclaimed superannuation accounts could be the start of a relatively simple solution to a major problem throughout the Western world.
— Robert M C Brown is a director of Bridgeport Advisers and Asset Managers
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