Aussies stick with dud super funds

Super funds Australia performance test APRA
Australians are so disengaged from superannuation that only 7% of members who were informed of their underperforming funds chose to close or move accounts.

If you really want a measure of how disconnected Australians are with their superannuation, the results of the super funds that failed the first APRA performance tests are telling.

Despite getting a letter which virtually said “your super fund is a dud and you should think about changing it”, only 7% of fund members closed or moved their accounts.

Worse still, that only represents 4.2% of the assets in these funds.

So out of a million fund members who were sent these letters, only 68,000 took any action by moving their money.

Perhaps the result is not quite as bad as it looks though.

Funds decide to take action

One positive result of the performance test has been that many of these 13 “named and shamed” super funds have been nudged into action and are improving their game.

The 13 funds that “failed” the APRA test out of the 76 MySuper products assessed were:

  • AMG MySuper
  • ASGARD Employee MySuper
  • Australian Catholic Superannuation and Retirement Fund’s LifeTime One
  • AvSuper Growth
  • BOC MySuper
  • Christian Super’s My Ethical Super
  • Colonial First State’s FirstChoice
  • Commonwealth Bank Group Super’s Accumulate Plus Balanced
  • EISS Balanced
  • LUCRF Super’s MySuper
  • Maritime Super’s MySuper
  • BT Super MySuper
  • Victorian Independent Schools Superannuation Fund’s MySuper product.

Many of those funds were busy trying to improve or merge after getting the bad news.

Closures, mergers and partnerships pursued

The Asgard Employee Super option was effectively closed with members transferred into BT Super.

BOC Super has merged with Equip, LUCRF Super has committed to merging with AustralianSuper and VISSF is merging with Aware Super.

ACSRF was trying to negotiate a merger with NGS but those discussions have broken down, and plans for EISS Super to merge with TWUSUPER have also failed to happen.

Maritime Super also entered a strategic partnership with Hostplus, which is a top performer.

So perhaps the apparent lethargy of members of the dud funds is actually a shrewd observation that their fund could outperform from here on given the action it has taken since the scare.

Let’s hope so.

Research shows the extent of disengagement

Perhaps adding some context to the disconnection of Australians to one of their biggest investments in the form of super, new research from industry super fund NGS Super shows some interesting findings about what Gen Z wants from a super fund and their attitudes to saving and investing.

Unsurprisingly, the research showed that the pandemic encouraged 73% of Gen Z participants to save more, while 31% said it prompted them to explore investment options such as shares or cryptocurrency, with a third now keen for advice on how to invest.

The big surprise was that they remain disengaged with their superannuation, which actually represents the sort of investment opportunities in which their interest has been awakened.

“Don’t care” who super is with

A staggering 41% said they didn’t care who their super is with and only 15% want to invest more into their retirement nest egg.

Perhaps the great distance between their current circumstances and retirement is just too great a barrier to overcome.

NGS said the results showed a disconnect between investment appetite and understanding that super is the largest investment most will have.

“The pandemic has made Gen Z hungry for more financial advice and investment options, but they’re looking for short-term satisfaction,’’ said NGS chief executive Laura Wright.

“We’re increasingly seeing this generation make investment decisions based on limited information via social media,” she said.

Critical time for Gen Z

“Gen Z is entering the workforce in droves, and we’re facing a critical moment in time to educate and engage with Gen Z’s about their super to help them build a more financially secure and sustainable future.

“It might not be surprising that our Gen Z workers are focusing on shorter-term investments rather than their super, but it is concerning how much they are potentially sacrificing for their future. Super can be a very powerful tool in a young person’s investment toolkit, and it’s being disregarded.”

Children do listen to parents

The research turned up some other interesting results, with free financial advice from parents the most popular source of information for 56%, followed by friends at 36%.

‘Finfluencers’ (financial influencers) were the fifth most relied upon source of financial advice, with one in four Gen Zs sourcing their information primarily from YouTube (59.9%) and Instagram (55.6%).

This explains why the Australian Securities and Investments Commission (ASIC) has ramped up enforcement activities for finfluencers and against online “pump and dump” activities.

Free financial advice could hold the answer

Perhaps one of the biggest disconnects – and one which has the potential to re-engage young workers with superannuation – is that almost 60% of Gen Z aren’t aware at all that they can access free financial advice from their fund.

Funds that work hard to engage with their younger members and help to feed their thirst for more investment knowledge could get some extra engagement and loyalty as a bonus.

With the difference between being in a dud fund and a good one measured in the hundreds of thousands of dollars over a lifetime, an early financial planning lesson with a super fund holds the potential to be the best hour a young worker and investor could ever spend.

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