Industry funds to auto-consolidate smaller accounts
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Industry funds to auto-consolidate smaller accounts

In a move that will save super fund members hundreds of dollars a year in fees, 19 industry funds have agreed to co-operate and auto-consolidate members' accounts that are inactive with less than $6000 in them.

They estimate that would save the typical industry fund member with multiple accounts $260 a year, and particularly benefit those working part-time and casually.

The problem with multiple accounts is that members pay more than one set of fees as well as more the one set of life insurance premiums.

An industry funds initiative will reduce the number of members with multiple super accounts.

An industry funds initiative will reduce the number of members with multiple super accounts.

Photo: Fairfax Media

REST, the industry fund for workers in the retail sector, only joined in this week. Hostplus, which covers workers in the hospitality sector – which has a large number of members working part-time and casually – is also part of the initiative.

It is being driven by Industry Funds Australia, the umbrella group representing most industry funds.

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REST is not member of Industry Funds Australia, but it and three other non-member industry funds have joined the initiative.

It is meant to work in addition to the efforts of the Tax Office, which uses its extensive data-matching powers, including tax file numbers, to make matches.

A super account is deemed "lost" if the fund cannot make contact with the account owner and there is no activity on the account.

Lost super accounts with less than $6000 in them are automatically transferred to the Tax Office.

Industry Super-owned AUSfund – an eligible rollover fund – will be co-ordinating the consolidation of members’ inactive accounts to an active account held in a participating industry super fund.

If a successful match is found, the account balances that are inactive will be merged with the members' account balance that is active – usually the fund into which compulsory super is being paid.

If AUSfund cannot find an active account it will manage the money until the rightful owner can be found.

The money will attract investment returns, less a very low annual administration fee of $11.50 a year and 0.53 per cent fee to cover other costs.

For the year to June 30, 2018, AUSfund produced an investment return of more than 6 per cent.

While there are no fees on the accounts held by the Tax Office, the accounts earn only the rate of inflation, or about 2 per cent. And the fund member has to initiate a search for lost super held by the Tax Office.

Fund members will be able to opt-out of the industry funds consolidation scheme, but a survey following an earlier trial found members who had accounts consolidated were happy for funds to chase their savings.

Bernie Dean, Industry Super Australia chief executive, says the auto-consolidation cuts through restrictive rules that limit the ability of funds to reunite members’ lost and inactive savings without first obtaining express consent.

“This is the right thing to do for members – they expect the system to sort out multiple accounts for them,” he said.