Real Wealth Opinion
Posted on June 20th, 2016 at 11:01 AM by David Orth
We’ve completed a lot of super searches. Currently we’ve located around half a billion in super: $506,799,429 to be exact. We’ve consolidated a fifth of those funds or around $100,000,000. So when it comes to super, lost super and superfunds – we know the business.
It never ceases to amaze us how retail and industry superfunds have gotten away with what we would call one of the biggest rorts in Australian history.
On many of our lost super searches, quite often it will come back that someone has 2 accounts with the same superfund. When we see this there’s usually less than $1,000 in each account, even more commonly under $500. This isn’t because they’ve only contributed that amount, it’s because they’re no longer contributing to the fund/s and they’re being eaten up by fees and insurance premiums.
The problem with having multiple superfunds of course means that you’re paying twice the fees, earning at a reduced rate and most likely paying for 2 of the same insurance policies.
Fair enough if you’ve got multiple accounts with different superfunds, quite frankly that’s the consumers fault. But what about when you’ve got multiple accounts with the same superfund? You could argue that again it’s the consumers fault. But we argue, in these cases - where’s the duty of care? When they process a new account, surely they can see that there’s another account under the same name. Furthermore, to remove any doubt that’s it not a person with the same name, each account is accompanied with your Tax File Number. So it’s almost a certainty that they’re aware that you have two accounts yet they don’t do anything about it because they’re not legally obliged and are getting double the insurance premiums and double the fees.
Doesn’t sound that scandalous does it but consider this hypothetical – a superfund has 500,000 members. 1 in 5 has multiple accounts or to put it another way 100,000 extra accounts. Each account gets charged $1,000p.a. for insurance and $500p.a. in fees. That’s $1,500 x $100,000 = $150,000,000 in free money. That’s just one superfund. The exact amount that superfunds make from this rort is very difficult to quantify. But also consider, from our experience, the average insurances and fees per account are higher than what we’ve hypothesised above.
We’re sure that they’re currently not legally obliged to inform someone that they have two accounts. But if they know you’ve got two accounts, they must then know that you’re being charged double – if that’s the case it doesn’t seem that honest does it?
If the government wants to make changes and if they want less people on the age pension – which they need to happen desperately, wouldn’t it be in their best interests to ban such a practice? How hard is it to put in a new law that states no person can have two superfunds with the same provider unless they’ve specifically requested it?