What you need to know about Your Future, Your Super

When it comes to the Your Future, Your Super reforms, it may pay to dig a little deeper into the details, as a greater understanding of them could make a huge difference to your retirement.

The Your Future, Your Super reforms involve some of the biggest changes to Australia's super system in years. They came into effect on 1 July 2021, and are designed to make super easier and more effective for you and include:

• Fund stapling
• Fund performance test
• Best financial interest

The reforms aim to drive lower fees, improve fund performance and prevent the creation of unintended and unwanted super accounts. The Productivity Commission in 2019, found that unintended multiple accounts and underperforming funds are harming millions of workers. By fixing these twin problems, it states, someone entering the workforce in 2019 would have an additional $533,000 in their super fund by the time they retire in 2064. 

Below we provide an explanation of each key component and how they may affect you and your fund.

Fund stapling

From 1 November 2021, your fund is 'stapled' to you as you change employers. This move is designed to prevent you from having a number of unwanted funds throughout your employment on which you pay multiple sets of fees.

Once you start a new job, your employer and the Australian Tax Office will ensure your Superannuation Guarantee contributions are paid into your stapled fund. If you want to join your employer's default fund, you'll need to fill out a Superannuation Standard Choice form. If you want to keep your existing fund (the fund which received your most recent super contribution), you don't need to do anything. You are also not locked into any fund – even if you have a stapled fund you can change to another eligible fund at any time.

Performance test

What does this mean? While past performance should not be viewed as an indication of future performance, it can provide some insights. The performance test introduced as part of the reforms, means funds are now being held to account for their performance through an annual test conducted by the Australian Prudential Regulation Authority (APRA). The aim is to put super funds on notice to ensure they provide the best value for their members and to protect them from poor outcomes.

The assessment compares each fund's net investment returns, including fees and taxes, over the past seven years with a benchmark return including fees. The results are published on the YourSuper website on 1 September each year and expressed as 'performing', 'underperforming', or 'not assessed'.

For 2021, only MySuper products – the ones into which employer contributions are automatically paid unless you choose another option – are subject to the performance test, but from 2022, other super products and specified investment options will be included.

Best financial interests

The reforms have introduced a change in the duties of trustees of super funds to ensure they act in the best financial interests of their members, with an aim to increase transparency and accountability. These best financial interests requirements are designed to make super trustees more focused on the decisions they make – such as those around expenses – to ensure they act in their members' best financial interests. Trustees will also have to make additional information available to members at their annual member meeting.

How you benefit

The Your Future, Your Super reforms help you to engage more easily with your super fund and to make better and more informed decisions. After all, the more you save through super, the more you'll have in your retirement savings. It makes sense to gain an understanding of these reforms to ensure you give yourself the best chance of achieving the retirement lifestyle you want.