{"id":854737,"date":"2026-08-14T07:56:10","date_gmt":"2026-08-14T07:56:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/854737\/"},"modified":"2026-08-14T07:56:10","modified_gmt":"2026-08-14T07:56:10","slug":"australias-us220-bil-of-zombie-pensions-expose-system-flaws","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/854737\/","title":{"rendered":"Australia\u2019s US$220 bil of zombie pensions expose system flaws"},"content":{"rendered":"

(Aug 14): Australia\u2019s pension system is awash with forgotten money: A$312 billion (US$220 billion) held in inactive accounts that continue to attract fees.<\/p>\n

Some 18% \u2014 or 4.2 million \u2014 of superannuation accounts were inactive at the end of March, up almost two percentage points in just nine months, according to an analysis of regulatory\u00a0data\u00a0by Elula, an AI software company that focuses on customer retention in the financial services sector.\u00a0<\/p>\n

The accounts haven\u2019t received any contributions or transfers for at least 16 months, which can happen when people change jobs, move overseas or temporarily leave the workforce. Savers can end up with multiple accounts.<\/p>\n

The increase highlights a growing challenge for the A$4.4 trillion system as it shifts from absorbing years of surging inflows to helping more Australians spend their savings. Its sheer scale is exposing shortcomings, with funds under mounting\u00a0pressure\u00a0from regulators to improve customer service and reconnect with disengaged members \u2014 an increasingly urgent task as 2.5 million Australians approach retirement over the next decade.<\/p>\n

The challenge for pension funds is stark, with an AMP\u00a0survey\u00a0last year finding that 27% of Australians had either never engaged with their provider, or don\u2019t even know who it is.<\/p>\n

\"\"<\/a><\/p>\n

\u201cSuper funds may have more to do,\u201d said Kirby Rappell, chief executive officer of research house SuperRatings. \u201cBut the other half of the equation is that it is extremely hard to engage people who don\u2019t want to be engaged.\u201d<\/p>\n

Overall fees on Australians\u2019 inactive accounts could total as much as A$2.2 billion a year, Elula estimates, based on average annual charges that can include administration, investment, insurance and advice costs. Individual fees can vary by member due to a range of factors.<\/p>\n

Even a more conservative estimate based solely on a A$70 flat annual administration fee puts the figure at almost A$300 million, according to Bloomberg calculations.\u00a0<\/p>\n

The savings remain invested and can continue generating returns even when accounts are inactive, though members can end up paying multiple sets of administration fees if they have more than one account. Many inactive accounts below A$6,000 are ultimately transferred to the Australian Taxation Office under rules designed to protect small balances from fee erosion.<\/p>\n

AustralianSuper, the country\u2019s largest fund, has about 600,000 inactive accounts \u2014 the most of any provider \u2014 according to regulatory\u00a0data. It was last year fined A$27 million after Federal Court proceedings brought by the Australian Securities and Investments Commission. The regulator had accused the fund of not doing enough to identify and merge duplicate accounts, which it has warned can leave savers paying unnecessary fees.\u00a0<\/p>\n

Not all duplicates are inactive, however, as some savers choose to hold more than one account for insurance benefits.<\/p>\n

\u201cAustralianSuper returned 9.77% for the majority of members last financial year, regardless of whether they chose to interact with their account or not,\u201d a spokesman said in an emailed statement. \u201cMembers have lots of reasons they leave an account inactive and we proactively contact them\u201d regularly to discuss their options, he said.<\/p>\n

For disengaged members, fees can further eat into savings. Super fund members \u2014 including those in self-managed funds \u2014 paid A$34 billion in fees in the 2024-25 financial year,\u00a0according to\u00a0research house Rainmaker, as funds contend with rising costs in areas such as member services and technology.<\/p>\n

More than $2 trillion is\u00a0estimated\u00a0to sit in inactive 401(k) accounts in the US, home to the world\u2019s largest pension pool, while the UK had about \u00a331 billion (US$42 billion) of\u00a0similar\u00a0accounts in 2024. Australia\u2019s system differs markedly: employers must contribute the equivalent of 12% of workers\u2019 salaries to retirement savings, a rate that\u2019s steadily increased since compulsory superannuation began in the early 1990s.<\/p>\n

Reforms allowing Australian workers to keep the same super account when they change jobs are helping reduce unnecessary duplicate accounts, said Misha Schubert, CEO of retirement savers\u2019 advocacy group Super Members Council. \u201cBut there\u2019s more to do.\u201d<\/p>\n

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