Playtime for super funds is over…

Robert Gottliebson writes in today’s Business Spectator or more regulatory changes on the way that open another chink in the defenses of Industry Funds.  By removing the default relationship between smaller businesses, industry super funds and employees:

“Currently, most employees on awards are virtually required to use industry funds. The relevant industry fund is often specified in awards and, in any event, small enterprises do not have the systems to enable them to send money to a variety of funds. This has enabled the industry funds to capture 26 per cent of the superannuation pie. While industry funds are below the 31 per cent held in self-managed funds, industry funds dwarf the 20 per cent held by the traditional retail funds headed by AMP, MLC etc.

The government will allow small businesses – which are the country’s largest employer – to remit compulsory superannuation payments made on behalf of workers directly to the Australian Taxation Office. This will cut red tape for small business but also make worker superannuation entitlements more secure.

Once employers have transferred money to the tax office, workers will then be able to instruct the tax office as to which superannuation fund that money should be sent. The industry funds will no doubt work very hard to keep the money but suddenly employees have a clear choice, which they have never had before.”


I once had a chat with a COO of a major industry fund who astonished me when he said, “We don’t really care about retention – members go but they always come in no matter what we do”.  This won’t be the case for much longer unless funds offer a really compelling and competitive offering.  It won’t be too long before all the crazy structural ties between consumers and default super funds are completely removed, and the Big 4 retail bank digital offerings make most super funds look prehistoric by comparison.