How to consolidate multiple super accounts

Are you one of the 3 million Australians that have more than one super account? According to the ATO, 18% of Australians have 2 accounts, 4% have 3 accounts and 1% have 4 or more super accounts.

Why does this matter? The simple answer is that multiple accounts will cost you more in fees and reduce your retirement savings.

What is the potential cost of having multiple super accounts?

The 2018 Productivity Commission (PC) report into superannuation estimated that more than a third of all super accounts are unintended multiple accounts and these cost a total of $2.6 billion every year in fees. And that’s not counting the cost of multiple insurance premiums.

One major problem of multiple super accounts identified by the PC report is so-called ‘zombie’ insurance. These are insurances, like income protection, which can only be claimed through one policy. So if you have multiple accounts you could be paying premiums for insurance that will never pay out.

These costs are exacerbated by foregone compound returns. The PC report cited the example of a worker with two accounts across their working life who will end up over 6% (or $51,000) worse off at retirement compared with a worker holding just one account.

On a positive note, reforms to insurance in super made in 2019 have reduced the impact of ‘zombie’ insurance. If a super account is inactive for 16 months or more the insurance cover it contains must be cancelled unless you tell the fund you want to keep it.

How do people end up with multiple super accounts?