Stapling ends the huge waste

Aussies will save $2.8 billion over the next 10 years as unnecessary fees and premiums are ditched

- Vita Palestrant

This month heralds the beginning of the end of a system that’s left super fund members holding multiple accounts on which they have needlessly paid fees and insurance premiums, amounting to a colossal waste of money.

Previously, if you didn’t nominate a super fund when changing jobs, your new employer would open a new account for you in their default fund. From now on employers will pay your super contributions into an existing account unless you choose otherwise, and that account will follow you from job to job. Under super choice, you can still nominate any fund as your main fund.

Treasury estimates this “stapling” will save Australians $2.8 billion over the next 10 years as fewer people pay fees and premiums on multiple accounts. It will also make it easier for fund members to track their super.

Consumer advocate Xavier O’Halloran, a director at Super Consumers Australia, says stapling means fewer people will be left paying for insurance across multiple super funds for policies they may not be able to claim on. “Paying for duplicate policies can cost you $50,000 over your working life,” he says.

Regulators and consumer groups alike have put total and permanent disability cover under the spotlight.

O’Halloran says if you work part-time, are unemployed, work in hazardous occupations or are older, it’s harder to claim an insurance benefit. “They face a higher bar than the standard test when it comes to claims.”

Over 90% of Australians have TPD cover through their super fund.

O’Halloran says ASIC did a study to see what the difference was for someone who faced one of these highly restrictive tests versus the standard test.