Research / Start Making Sense / Superannuation

Start Making Sense – Ep 8: Super stapling – the new growth challenge

Under the government’s super stapling reforms, we will see members take their super funds with them to new jobs instead of having new accounts created for them automatically.

That’s undeniably good news for consumers.  It will stop the creation of multiple accounts that leave the members vulnerable to fees eroding their account balances.

But the proposed changes to default super present real challenges for some super funds, especially those that are heavily reliant on employer arrangements for new members.

Thanks to CoreData’s Super Brand research we know which funds they are. Our Super Brand research delves deeper into brand health, member perceptions and member intentions.

Click on the chart to enlarge

For each of the past six years we’ve asked members how they joined their fund. And  this year more than 6,500 members of the 26 largest super funds answered our survey.

In this chart we’ve categorised super funds into two groups: profit-to-member funds in orange; and retail funds in blue. Profit-to-member funds include public-sector funds and industry funds.

We have plotted the percentage of super fund members who say they joined their fund by default; that is, through arrangements between their employer and the super fund.

Our first insight is that the profit-to-member funds are most at risk. They’re way more reliant on employer arrangements than retail funds are. More than three quarters of members of profit-for-member funds join by default. Less than half of retail fund members join by default.

The second and more interesting insight  is that these proportions haven’t really changed in the past six years.  Even though profit for member funds have long recognised the risk of losing default employer arrangements, they still haven’t done anything meaningful about it.

Sure, there will be some winners from super stapling, such as super funds that automatically source their members from industries that employ young people.

Click on the chart to enlarge

According to ABS data, just three industries in Australia employ half of the young people – people aged 15 to 24 years old. They are: hospitality, retail, and construction.

For all other funds, growth will need to come from somewhere other than the employer.  Most funds are investing heavily in digital acquisition strategies and some are finally engaging the independent financial adviser market. Our research shows they’re having very limited success at this point.

Something has to change for super funds. What got us here, won’t get us where we want to go.

For more information on CoreData’s Super Brand Research, contact Jason Andriessen on [email protected] or 0407 490 699

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