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Super reforms may do 'more harm than good'

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Treasurer Josh Frydenberg has hailed the "most significant reforms" to super since 1992.
Camera IconTreasurer Josh Frydenberg has hailed the "most significant reforms" to super since 1992. Credit: AAP

Superannuation laws designed to boost savings and cut fees have passed parliament but some industry groups are concerned they will do more harm than good.

Australian workers currently often unknowingly open many small accounts and get signed up to default insurance, attracting multiple fees.

Under new rules passed in parliament on Thursday, workers will be “stapled” to their existing super fund when they change jobs from November 1.

Treasurer Josh Frydenberg and Superannuation Minister Jame Hume hailed the package as the “most significant reforms” to super since it was made compulsory in 1992.

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“Through these measures, the Morrison government will ensure the superannuation system works harder for all Australians by reducing waste, holding underperforming funds to account and strengthening protections around the retirement savings of millions of Australians,” they said in a joint statement.

Mr Frydenberg said Australians pay more than $30 billion in superannuation fees and charges each year and the overhaul would save consumers more than $17 billion.

The laws also benchmark performance and shut down access to poorly performing funds.

But critics say it will trap millions of people in dud products, including super funds slammed for dodgy dealing by the banking royal commission.

The Industry Super Australia organisation said the government has given poor super products a leg up at the cost of the workers they are fleecing with their high fees and lousy performance.

Labor opposed the changes and independent senator Rex Patrick failed to extend performance tests to more retail super products during the hard-fought final two days of debate.

The Australian Institute of Superannuation Trustees said that would mean more than a third of super savings won’t be subject to the performance test, leaving millions of Australians stapled to underperforming and untested funds.

“AIST remains deeply concerned that these legislative carve-outs provide incentives to unscrupulous providers to push high-fee, underperforming products onto unsuspecting consumers,” chief executive Eva Scheerlinck said.

The AIST warned the package could cause more consumer harm than good and not deliver on its objectives.

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