Unnecessary Accounts

The Senator quotes the figure that there are 31.7 million super accounts for 11.4 million adults with 6.4 million accounts being considered “lost”.

We suggest one significant issue for the number of super accounts is simply the fact that there is a significant taxation barrier to the rationalisation of super accounts.  This barrier is that there is no general capital gains tax relief on transferring assets from one superannuation fund to another superannuation fund.

Additionally, there can be good reasons for maintaining more than one super account.  Many accounts are maintained simply because of the level of risk insurance cover which attaches to the particular account.  This cover is generally not able to be transferred from one super fund to another.  If the member closes a super account to which significant risk insurance cover is attached, the member must reapply for cover – meaning that the member will generally be re-underwritten and subject to medical evidence requirements. 

Finally, many super funds do (by reason of economies of scale) provide risk insurance cover at competitive rates and underwriting conditions.