Multiple Madness

Jeremy Cooper’s MySuper is predicated on the fact that direct engagement in superannuation decision-making is not a priority for a large proportion of the population.

In addition to MySuper, which would see members invested in the default option of their current superannuation fund invested in a product with a single, diversified investment strategy designed to suit members as a whole, Cooper is encouraging funds to consider merging to achieve economies of scale and reduce costs for members.

While competition in the super industry is vital, a simpler, lower-cost system would undoubtedly benefit the two in five Australians who currently have multiple super accounts – one in 10 of whom have between three and five different funds.

Recent research by CoreData into dormancy or inactivity within super funds reveals 38.3% of Australians have at least two super accounts, while 13.5% have between three and five accounts.

Furthermore, almost two thirds (64.6%) did not select their main fund themselves, rather allowing their employer to select the default fund for them.

The study, which covered 595 Australians, aged 18 to more than 60 years old, aimed to explore the drivers of dormancy and potential lures for winning back members.

Just under half of those with more than one super account (47.7%) have at least one dormant super account, meaning they have stopped making contributions to one or more accounts and/or moved their funds elsewhere.

While almost three quarters of dormant members have just one dormant fund (70.3%), one in five (20.9%) have two dormant accounts and the remaining 8.8% have three or more.

Overwhelmingly, the most common reason provided by dormant members for stopping contributions was change of employment, suggesting people are not engaged enough in their super to make an active choice to stay with their fund when they change jobs.

The most commonly cited reason for remaining a member rather than closing the account was that they hadn’t got around to it yet (36.1%), followed by the claim that they might possibly use the account in future (28.1%).

A further 14.9% say they couldn’t be bothered to close the account, while 10.0% claim they did not know how to.

Interestingly, when asked what their dormant fund provider could have done to stop them from leaving the fund or moving their money elsewhere, 25.7% said show keenness for my business and 24.1% said contact me more frequently.

While the key to dormancy is prevention rather than cure, for many members the door remains ajar – they just need to be given a reason to reactivate.

*Data taken from the CoreData Dormant Members 2010 study