Retirement Reports get cut

Retirement Reports get cut

With quarterly super statements being scrapped, the onus is on you to check if you've been paid.

Retirement Reports get cut-Only Yearly now! Instead of receiving a quarterly statement from their employer, workers will have to wait for their annual super fund statement to check how much retirement savings they have received, and indeed, if they have received anything.

"It's regrettable and retrograde," says the vice-president of the Australian Institute of Superannuation Trustees, Andrew Whiley.

Retirement Reports get cut-Not for Union Members! Employees covered by some state awards and enterprise agreements will still receive quarterly statements, but the ACTU says up to 3 million people working for small businesses will not.

The then minister for super, Helen Coonan, announced in July that as of January 1, the Government would scrap the quarterly reporting rule because of the "high compliance burden faced ... by many small businesses".

The Government confirmed this week it would not replace quarterly reporting with annual reporting, noting that employers must continue to pay the mandatory 9 per cent super quarterly.

"The Government believes that a combination of practices and safeguards found throughout other Australian legislation will allow employers and employees to remain informed about superannuation," Coonan said in July.

Retirement Reports get cut-Industry Shocked! The move has shocked many in the industry, as well as consumer groups who thought they had convinced the Government of its merits when quarterly reporting replaced annual reporting in June 2003.

"[Super] is an area where there needs to be greater accountability to members," says Catherine Wolthuizen, the Australian Consumers Association's financepolicy officer.

"One of the best ways of ensuring employers are more accountable in making required super payments is to report them more regularly. While that may involve some compliance cost to small business, the cost to employees who don't receive their super entitlements is very much greater."

Opponents of the change argue there are four major areas of concern: further public disengagement from super, the time lag making it difficult to recoup non-payments, the potential for super to get "lost", and the need for greater security for super as choice of funds becomes a reality from July 1 next year.

Philippa Smith, the chief executive of the Association of Superannuation Funds of Australia, says receiving quarterly statements is a "very good reminder" to employees that super is part of their wages and should be monitored as closely as their regular pay packet.

Retirement Reports get cut-Only Yearly now Danger!! "The problem is if that doesn't happen, people don't know about it until the end of the year. So there is a long lag time before people can follow up non-payment," she says. "[Quarterly reporting] is not an onerous thing when the system is set up."

But the Australian Chamber of Commerce and Industry's chief executive, Peter Hendy, says the change does not prejudice employees.

"An employer is still compelled to make quarterly payments, the superannuation fund provides annual reports to members [employees], employers maintain time and wage records and any employee at any time can ring up their superannuation fund and check if employer payments are up to date," he says.

Retirement Reports get cut-But does it matter if the public don't understand them anyway! Wolthuizen cites last year's ANZ Financial Literacy survey that found 21 per cent of people do not understand super statements and 60 per cent could not identify items on a super statement correctly.

"We know levels of financial literacy are at their lowest when it comes to super. We need to be very careful about the assumptions we make that people know about their entitlements and will know that their super funds will report it to them," she says.

Retirement Reports get cut-How will employees know if they are getting ripped of! Financial literacy aside, many are concerned that the time lag will mean more employees simply will not know if their employer has stopped paying them the super guarantee.

Retirement Reports get cut-People are being ripped off! According to the Australian Tax Office, which is charged with ensuring the money is paid, last financial year as much as $65 million didn't make it into employees' accounts.

Smith says the bulk of employers do pay the guarantee, although "at the small employer end we do see instances of employers wanting to use those entitlements as a cash flow by not paying that money to year's end. The problem is it can be a risky strategy for the employee, because if the employer goes belly-up their entitlements have been lost."

The president of the ACTU, Sharan Burrow, says: "Too often we have seen companies collapse leaving workers with unpaid entitlements including superannuation contributions.

"The Government [GEARS] scheme that is meant to protect their entitlements is flawed and doesn't properly cover employees' lost superannuation. The Government should be looking for ways to make employee entitlements like superannuation more secure."

Whiley is also sceptical about relying on the Tax Office to collect unpaid super.

"We are not happy with the compliance mechanisms that exist and are administered by the [Tax Office]," he says. "There are still difficulties getting enforcement."

David Haynes, the chief executive of AUSfund, which looks after lost and inactive super accounts, says there is "a very strong risk" that the change will lead to more super being lost as employees change jobs in an increasingly casualised workforce.

Estimates for lost super stand at $7 billion, but this could just be a drop in the ocean of what is to come, he says.

Retirement Reports get cut-Where has all the money gone! Since compulsory super was introduced in 1992, billions of dollars have become separated from their owners. There are now more than 4.6 million lost super accounts.

"Super is at most risk when people change their jobs, and at least risk when people get regular information about their super as close to time that they earn that money," Haynes says.

Retirement Reports get cut