The do nothing principle could mean that superannuation contributions are made to a different fund than prior to 30th June 2005. Under the new system, the employer has no choice but to make payments to the default fund. Although there can be more than one default fund per employer, the fund which is notified to the employee may be different to the one prior to 30th June 2005. Industry anecdotal evidence suggests that an estimated 90% of employees have made no election and therefore their current superannuation may be to a new fund. If that fund has a different level of life insurance or more expensive life insurance or different medical requirements, the payout on death can be different. If the investment criteria and range of products is different (and it is almost certain that it will be) the default will probably be a balanced portfolio, which may not suit a more conservative investor and certainly will not suit a young and aggressive investor. There is also a danger that some legal firms will take action against employers for switching funds, yet those employers are simply meeting their obligations under the Super Choice Rules. Who will win these cases - possibly only the legal firm? The key is to take an interest and make a decision and advise the employer. It is now almost 12 months since the introduction of super choice and another round of employee notifications. Start planning now.
20th-June-2006 |