Choice of Fund Is Here

Choice of Fund
January 15th 2004
www.1st-retirement.com

Now that Super choice legislation has been passed, 1st Retirement has published the following info about choice of super fund, in particular who will be affected by the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2003, and some steps that must be taken by you if you want to take control of your own super.

When does Choice of Funds start?

Who will have Choice of Funds?

Basically you can now have the choice of starting your own Self Managed Super Fund

Some organisaitons estimate that 30% of employees already have Choice of Fund and an extra 40% could get choice under the new legislation.

Who will NOT have Choice of Fund?

1.Employees whose 'contributions' are made to unfunded public arrangements.
2.Commonwealth employees who are members of the CSS, PSS (in full) and employees receiving productivity benefit payments, until such time as legislation is enacted giving them choice.
3. People for whom contributions are being made in accordance with certain Workplace Agreements or certified agreements under the Industrial Relations Act or Workplace Relations Act.
4. People for whom contributions are being made in accordance with a state industrial award. This means that where the award requires payment of contributions at less than the 9% SG rate to the award fund, all the employer contributions can be made to that fund.
5. People for whom contributions are being made under a prescribed law (such as where the contributions are made to an unfunded public sector scheme or under a State industrial award).
6. Defined benefit fund members who would still get retrenchment and retirement benefits if their employer paid future contributions to another fund.

NB. If you are not sure, you should check with your employer whether you are affected by any of the above conditions. And then re-check because they may not really know.

Default arrangements

If as an employee you do not exercise your choice, one of two things can happen:

If your are covered by a Federal award that nominates a fund*, then the you must continue to pay contributions to that fund, in accordance with the award.

If you are not covered by a Federal award, your employer may choose any "eligible choice fund". This is currently any complying fund that offers life insurance cover of the kind specified in the regulations yet to be made.

There is also a new safeguard provision that will make it an offence for a super fund trustee or its associates to induce or pressurise people into becoming a member of their fund. The same goes for a fund making inducements or applying pressure to an employer in an effort to become the employer's default fund.

* Any requirement in a Federal award for an employer to make contributions to a specific fund is unenforceable under the new choice laws, to the extent that if you wish to exercise choice and make contributions to another fund instead, then you are free to do so.

What your employer must do Before 29 July 2005

After 1 July 2005

As a new employee you must be given a standard choice form by the employer within 28 days of commencing employment. If an employee as previously not exercised a choice but asks the employer for a standard choice form, that form must be given to them within 28 days.

Where you have chosen a fund that is no longer an eligible choice fund, the employer must, within 28 days of becoming aware, give the employee a standard choice form.

A standard Choice of Fund form must also be given to you within 28 days, where the you have opted for the default fund and the employer changes the default fund.

What will be in the standard Choice of Fund form?

The standard choice form must:

1. Advise you that you can choose their own fund.
2. State the name of the default fund should you not make a choice.
3. Contain additional information as required by the regulations. (These will be released at a later date.) NB For employees who are members of a defined benefit fund that the employer is contributing to, the standard choice form must include information set out in the regulations.

If you choose another fund, what do you have to do?

If you want to exercise you Choice of Fund you must provide to the employer details of the relevant super fund and evidence that the fund will accept their contributions. It is not clear at this stage what form the evidence should take.

When does the fund I have chosen become my Choice of Fund fund?

Two months after you have given notice to the employer, you contributions must start going to their choice fund. However, it can be earlier if the employer chooses.

How can I go about making the right choice?

The main thing to remember is, go in with your eyes open. Think carefully before you change funds, especially if you are approached by 'slick' salespeople eager for you to join their fund.

+++++++++++++++++++++++++++++++++++++ Take a look at this toolkit that will really help you make all the right choices about what to do when choosing the right way for you to go Choice in Fund
++++++++++++++++++++++++++++++++++++

Now you must look carefully at the fund you are currently in
- make sure you understand it
- whether it meets your needs and is delivering returns that you are satisfied with
- Is there a good reason to change funds?

As the saying goes, "Look in the fridge before you go shopping".

Make sure you are being given enough information to properly compare any offer from another super fund with your current fund.

Check the price tag (the fees and charges) of the fund you are being offered, and compare it with the fund you are in now.

Understand the costs, and the differences in features between what you have, and what you are being offered.

Make sure you understand any insurance cover being offered.

Be very wary of salespeople and financial planners who offer you what seems like a fantastic deal.

Check what's in it for them.

Keep asking questions until you are satisfied.

Be aware of entry and exit fees - even under the new disclosure regulations, these are not necessarily clearly displayed, and can be quite hefty.

Now this is all explained in the aformentioned Choice of Fund Toolkit - click here to find out more Page Choice of Fund Ends