Wake Up

Super funds are constantly faced with the challenge of engaging their members, but the reality is that more than half of us didn’t even care enough about our superannuation to select the fund we’re currently in.

Recent research by CoreData found that 57.6% of super fund members did not select their main fund themselves – rather, they simply joined their employer’s default fund.

Furthermore, two fifths of us (42.4%) admit to having one or more ‘dormant’ super accounts. That is, accounts that are sitting there, inactive, while administration and investment management fees are deducted from them.

Those of us with a reasonable level of financial understanding realise that it would be far more sensible and cost effective to consolidate our accounts with a preferred provider.

So why don’t we do it? Inertia is one of the primary reasons – we struggle to see super as ‘our’ money, since we can’t access it until we retire.

Furthermore, there are other life issues that are seen as more pressing and so despite our best intentions, super falls by the wayside.

There are of course people who believe that diversification means having more than one super fund. For those people, education is crucial, and it’s up to the industry to increase the level of financial awareness, particularly with SG contributions set to increase to 12%.

But let’s not forget those people who feel that putting any energy into their super is a waste of time, because they’re convinced that the Government is going to change the rules around access to super.

While they might have a point (about the Government changing the rules, not that super is a waste of time), in the end superannuation is a tax effective and prudent way of saving for retirement that can’t be ignored, no matter whether it’s likely to be used as a political football or not.

Whatever the reason, super fund dormancy is a lose-lose situation – the member is worse off financially due to the multiple layer of fees they’re paying, and the fund is worse off for not having that member channel all their contributions to that fund.

Of course, in some cases, tackling dormancy could work against the super fund since waking up sleepy members might prompt them to consolidate their funds elsewhere.

But it’s a risk worth taking. It’s always harder to produce a strong return without an element of risk.

*Data sourced from CoreData’s Dormant Members study 2010