There has been an increase of switching since the introduction of Super Choice in 2005, but 69 per cent of super members are still in a fund they kept from a previous job or the default fund their employer put them into, according to the Investment Trends 2013 Member Sentiment & Communications Report.
However, this could change with increased awareness about MySuper products and super in general, with many members still unaware of MySuper.
Investment Trends senior analyst Uwe Helmes said default funds still get the bulk share of new entrants to the labour market and those who change jobs, so it’s critical for both industry and retail funds to make this space their own.
“It is quite surprising that years after [choice of fund] has been introduced, 69 per cent of fund members are in their fund by default. Six or seven years ago this number was even higher, it was closer to 90 per cent, so obviously it has changed but less so than what people would have thought,” Mr Helmes told InvestorDaily.
Mr Helmes said one of the reasons for this was the disengagement of super fund members, which is particularly the case with younger members.
“However, as members get older and the balance starts to pick up and they have more in their super, they start to think about it a lot more,” he added.
Younger members said mobile apps and a website login could increase their engagement with funds, the report found.
The main reasons for members to switch funds are a change of job or based on advice, otherwise they generally stay in the same fund unless they become dissatisfied, according to the report.
Mr Helmes said awareness was one of the main challenges with MySuper products given that two thirds of the members asked about MySuper were unaware of what it is.
However, once it was explained that MySuper was a cheap default option with low fees, a majority supported its introduction.
As a result of members simply choosing their employer’s default fund rather than making an active decision, the main opportunity for MySuper funds is to become an employer default fund as these MySuper funds will get a larger proportion of the new entrants, the report stated.
Auto-consolidation [of funds] could pose a challenge for funds in general as the research indicated some funds are likely to lose five to 10 per cent of their accounts from auto-consolidation.
“Again, this links in with engagement because there are a lot of inactive funds out there and quite a lot of members have multiple super funds and are actually unaware of it. The fact that these inactive funds could be consolidated does pose a challenge for a lot of the super funds out there,” Mr Helmes said.
