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Stopping the flow of super

THE disappearance of employees’ superannuation has become a $5.4 billion problem, affecting almost four million superannuation members at an average loss of about $1,420.

WA Financial Planners believe the problem is particularly evident in industries relying on seasonal or transit workers, such as mining and agriculture. Both play a dominant role in the WA economy.

The problem has caught the attention of the superannuation industry, which is now seeking solutions by developing best practice standards for superannuation funds to prevent and manage lost members.

The Australian Institute of Superannuation Trustees (AIST) last week released research undertaken by industry expert Peter Binns at the request of Australia’s largest rollover fund, the Australian Preservation Fund.

A lost member is defined in the Superannuation Industry (Supervision) Regulation Act as someone who is uncontactable because the Trustee never had an address or it had become invalid because the person had moved.

Alternatively, it relates to a member who has not received employer contributions for more than two years, or if the person joined the fund from another scheme as a lost member.

Also being left short changed are backpackers or overseas visitors who accumulate superannuation but are unable to access it when they leave because of payout age require-ments. Under the Act, the Trustee must declare the money lost and place it in a central lost members’ register administered and protected by the Australian Taxation Office until the employee makes a claim.

Each time an employee changes jobs or relocates they run the risk of losing track of their superannuation funds.

Financial Planners Association director Nick Bruining believes the concerns are only just starting to surface as the money being held increases each year.

“The problem seems to be those who are part-time workers or who left their workplace after only a short period,” he said.

Mr Bruining backs the Federal Government’s plans to introduce legislation that will ensure employers contribute to superannuation funds on a more regular basis. He also would like tax deduction incentives for self-funded contributions to be made more attractive.

“At the moment, employees making their own contribution can claim the first $3,000 as a tax deduction and above that just 75 per cent can be claimed,” Mr Bruining.

“This should be increased to provide a greater incentive.”

Managing director of superannuation and financial planner consultants Capital Partners, David Andrew, agreed there were significant “chunks out there of lost superannuation money”.

“It’s a significant problem in WA. Lower income earners working in mining towns and moving from place to place could find their money ends up as ‘lost’,” Mr Andrew said. “The transit workers are harder to contact.”

But he said the amount of money lost had to be put into perspective with the amount of money flowing into superannuation each year. While growing exponentially, lost funds represent only around 1 per cent of the total funds under management.

To Mr Andrew, further regulation of the industry is not the answer. Instead, educating people and promoting the ease that lost funds can be accessed should be the focus of the Australian Taxation Office.

Mr Andrew believes the superannuation industry is not calling for changes for commercial reasons driven by a lack of willingness to part with money, but rather in the interests of the members and as a way of combating the regulations.

Non-compliance with the Act can lead to fines of up to $11,000 for individual trustees or $55,000 for corporate trustees.

“These sort of amounts don’t matter to the funds. I don’t think their concerns will be commercial. My feeling is that no-one feels comfortable with members contributions being lost,” Mr Andrew said.

AMP WA State manager Alex Rothon shared Mr Andrew’s sentiments saying that the amounts of money “disappearing” was insignificant com-pared with the total managed funds.

Ms Rothon said the cost of chasing down the superannuation owners was also not prohibitive as it was recouped in part from the member’s fund.

She said the best way for people to avoid having a number of funds operating was to consolidate the superannuation into just one fund. This makes keeping track of super simpler.

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