Q: A super fund that I have an account with wrote to me to say that it planned to close my account after the account balance ran down to zero. I am in my late 20s, have a career now but have had a number of jobs along the way and have money in several funds. How can all my money disappear from this fund?
A: Until June 30, 2013, if a super account held less than $1000 and it contained superannuation guarantee amounts, the super fund was required to protect the account under member protection rules.
A protected account was subject to different treatment. Any administration fee that the fund charged could be no greater then the investment return credited to the account. This was designed to maintain the balance of the account.
The Government abolished the member protection rule as part of a series of changes in 2013. It put forward several reasons for doing this.
It said members with larger balances were, in effect, subsidising members with small balances and that this was unfair.
It said the protection rules might act as a disincentive for members to consolidate their small account balances. And it said the system was administratively complex and expensive.
If the account is not active and the balance is less than $4000, then your money may be transferred to the ATO as “lost super”. You can claim lost super at any time. You may want to ask the fund why it did not do this.
The Government has been criticised for this change, because it has done little to encourage young people to consolidate small account balances.
Your story underlines the importance of fund consolidation. One way to do this is to pick the fund you want to stay with (probably the one your money is going into now), contact it and ask it if it can do the consolidation for you.
One thing to consider is the insurance offered in each fund. All super funds provide you with life insurance but the level of cover and premium rates vary.
An alternative way of consolidating your super is to use the myGov website, which will link you to the Australian Taxation Office.