The Introduction of Choice of Superannuation Fund: Results to Date

Abstract

Commonwealth legislation providing for choice of superannuation fund has now been in operation since 1 July 2005. This paper explores the extent to which employees have exercised choice in the period immediately following the implementation of fund choice. The data available suggest that choice of fund has had only a modest impact. However, while community awareness of superannuation has increased and the level of member attachment to the main superannuation fund has increased, a downturn in investment returns, and subsequently in member sentiment, could have a significant impact on member preparedness to choose another fund

Don't Judge a Superannuation Default Investment Option by Its Name

“…However, the vast majority of superannuation members do not make a choice and consequently join the default fund nominated by employers, and/or the default investment option, nominated by superannuation fund trustees. Industry research shows that fund switching rates are only about 8% per year and much of this is due to employees changing jobs (Clare 2007). Similarly, 82% of superannuation fund members are in their funds’ default investment option (SuperRatings 2006).…”

Who starts a self-managed superannuation fund and why?

“…Large numbers of people have moved into SMSFs since choice of fund legislation in 2004 made this easier (Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2004; Clare, 2006). Although recent retirement savings policies, such as MySuper, favour 'libertarian paternalism' where individuals are defaulted or nudged into choice patterns designed to compensate for a lack of interest or capability (Bateman et al, 2014;Thaler, 2002, 2013;Brown, 2016;Thaler and Sunstein, 2003), rates of switching between large funds have been low, but the volume of funds moving into SMSFs, as seen in Figure 1, has been high.…”