If 2004 represented a seminal year for the superannuation industry in Australia then 2005 represented a year of change.
While 2004 saw the Federal Government’s legislative plan for the future of superannuation put in place, the past 12 months have witnessed the execution of that plan — particularly the implementation of the new choice of superannuation fund regime.
But while choice of fund was probably the most talked about topic in 2005, it was trustee licensing that was commonly agreed to be the factor that would most radically alter the superannuation industry in 2006.
And, as 2005 draws to a close, it is worth asking whether choice has yet made a difference to members of superannuation funds in Australia, and the answer is an unequivocal ‘no’. Forget the millions of dollars spent by the Commonwealth and industry superannuation funds. In the end the numbers speak for themselves. Barely 7 per cent of members opted to change funds in the first five months of the new regime.
What is more, data compiled by Mercer Human Resources Consulting, the Association of Superannuation Funds of Australia (ASFA) and Rod Cameron’s Australian National Opinion Polls (ANOP) suggests that far from looking to leave their existing superannuation funds, most Australians decided to lock in for the long haul.
And if, as has been suggested, the Government’s intention in introducing choice of superannuation fund was to undermine the role of industry funds, then the tactic backfired. Almost without exception the major industry funds are reporting increased membership as a result of employers selecting appropriate default funds.
This is something that was noted by the chief executive officer of the big health industry superannuation fund HESTA, Anne-Marie Corboy.
Corboy said that HESTA had recorded a 65 per cent increase in employers joining the fund in the September quarter compared to the same period last year.
Corboy said that the monetary value of members moving money from other funds to HESTA had increased by 52 per cent to $123 million for the quarter.
What Corboy appeared to be identifying was the consolidation phenomenon — something also identified by ANOP in work it carried out for ASFA.
Consolidation is the term being used to describe what happens when superannuation fund members realise they have account balances within a number of funds and use the new choice regulations to consolidate those balances within a single fund.
In explaining his company’s research, ANOP’s Rod Cameron said that in the end the number of Australians who had opted to change superannuation funds amounted to only 7 per cent.
What is more, Cameron said the ANOP data suggested that only another 5 per cent of people were still seriously considering changing funds, while 55 per cent of respondents said they were not at all likely to change funds.
“This represents a sharp increase in commitment to existing funds,” he said.
But what was important about the 5 per cent of people who said they were still seriously considering changing was that most indicated they wanted to do so in order to consolidate their arrangements.
The ANOP and industry fund data has been broadly confirmed in the retail funds arena, with director of corporate superannuation at AMP Greg Healy noting that minimal churn had occurred and that in many instances members of AMP funds had simply opted to move from one particular AMP fund to another.
Healy said that despite the heavy advertising undertaken by retail newcomer Virgin, the available data suggested there had been little discernible interest exhibited by AMP super customers.
The chief executive of ASFA, Philippa Smith, said that the bottom line of the ANOP research was that there had been no big bang resulting from choice
“But what the research does show is that of the increased majority who have decided to stay with their current fund, almost half said they are doing so because of loyalty and a positive commitment and satisfaction with that fund — not just inertia,” she said.
