Legislation aimed at reforming the superannuation system and cutting out “unnecessary” insurance fees was introduced last week in Federal Parliament.

Set to start on July 1, unintended multiple superannuation accounts will be a thing of the past when employees change jobs, eliminating the need for Australians to pay administrative fees to more than one super fund.

Australians currently pay $30 billion per year in superannuation fees, while three million accounts sit in underperforming funds worth more than $100 billion in retirement savings.

Super trustees will be required to provide more accountability to members and comply with obligations mandating that they must “only act” in the best financial interest of members.

The Morrison Government says the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 addresses key recommendations from the Productivity Commission’s inquiry into ways to improve the retirement income scheme.

The measures will reduce waste in the system and save Australian workers $17.9 billion over 10 years by holding underperforming funds to account and strengthening protections around the retirement savings of millions of Australians, according to a statement from the office of Treasurer Josh Frydenberg.

“This package builds on the Government’s superannuation reforms which include consolidating $2.9 billion held in unintended multiple accounts on behalf of 1.4 million Australians, capping fees on low balance accounts, banning exit fees and ensuring younger Australians do not pay unnecessary insurance premiums,” the statement says.

The Financial Services Council (FSC) says it backs the move to “staple” workers to one super account when they change employment. Not only will this save members from paying unnecessary fees, it will also help them with their insurance needs.

“Stapling could be successful in engaging members with their super, including reviewing the ongoing appropriateness of insurance benefits, but only if members are provided with the opportunity to review their superannuation arrangements regularly and at appropriate times, especially when they are changing jobs,” FSC says in a submission to the draft legislation.

FSC says it supports the objective of the broader package of reforms.

“FSC analysis on the benefits of stapling shows consumers will save up to $1.8 billion in fees in the first three years after implementation,” CEO Sally Loane said. “The super industry can only justify calls to increase the super guarantee to 12% if the system becomes more efficient.”

However some stakeholders have expressed concerns at certain aspects of the legislation.

Industry Super Australia, which represents 15 funds, says the Government’s proposed performance benchmark test for super funds needs to be reviewed. It wants the test to include all fees charged, including administration fees charged by for-profit funds.

The bill in in its present form means “dud for-profit funds” will be allowed to keep underperforming without consequence and ripping more than $10 billion in profit without ever having to justify how its inflated fees are in their members’ best interest, the group says.

“Ultimately we’d like to see the Parliament enact changes that will deliver [more to] members,” Industry Super Australia CEO Bernie Dean said.

“These laws should mean that all funds should have to justify how all fees are in the best financial interest of members, instead there is a giant carve out that will allow retail funds to keep creaming $10 billion each year in profit no matter how poorly they perform.”