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Superannuation: super education investment

Every Issue

Cite as: (2008) 82(12) LIJ, p.84

Rising competition between super funds and the global falls in investment markets has meant that super has become of more interest to most Australians.

Getting Australians to take a greater interest in super has always been a challenge. It is both a complex and a deferred benefit, characteristics which have stopped people becoming more engaged with it.

Two recent developments in the industry, however, have drawn more attention to super.

Choice of fund legislation was introduced in 2005 to give most employees the right to choose their own fund.

An immediate consequence was to create more competition between funds. Funds had to both build their product and service offering to be competitive and market themselves to existing and prospective members. They also invested more time educating members about the value of super.

The overall result has been an explosion in information. These days it is hard to read a newspaper without coming across an article about super. Plus, super funds increasingly send members information.

Slowly, Australians’ understanding of super has increased and with it they have started to exercise greater choice, presumably choosing a fund more suited to their needs.

A recent report by Ernst & Young1 showed switching is on the rise. The study found 10 per cent of workers with super (about 1 million people) had changed their fund since choice was introduced three years ago and the figure was growing by 3 to 4 per cent a year.

Notably, industry funds and self-managed super funds are experiencing the greatest growth, largely at the expense of retail funds. Part of the shift has been the realisation by many superannuants that industry funds are outperforming retail funds.

A recent APRA report showed industry super funds’ historical investment performance has consistently outperformed retail funds, largely because of the higher fees and commissions that retail funds pay financial advisers.2 Costs are cutting the return from retail funds to 5.3 per cent on average, compared to not-for-profit funds at 6.2 per cent.

As superannuants better understand how these differences between funds can erode their accumulated savings, they are beginning to vote with their feet.

While no one is happy about the recent market downturn, one upside has been that members’ attention has been more focused on super.

Super fees have come under particular scrutiny as members look for ways to mitigate losses and maximise returns. Because there is a great variation in the fees of different types of super funds, there are significant opportunities for members to reduce fees.

The downturn has also identified gaps in financial literacy, increasing the need for super funds to continue educating members.

Since the downturn, some super funds have reported sharp increases in members switching to cash to protect themselves from the ongoing impact of the crisis on equity markets. At this stage, switching to cash may provide some short-term peace of mind, but will also crystallise losses.

At some time members will be confronted by a further decision as to when to leave cash and invest in equities or other market-linked securities. No one knows when investment markets will turn around. Trying to “time” the market is fraught with difficulty but it is best to wait for the crisis to work its way through.

When it comes to investing in your future it is also important to invest time educating yourself.

Use the current investment crisis as an impetus to take a greater interest in your super. Call your super fund and discuss any questions you have. One call could identify some simple things you can do to better position yourself for the long term and maximise your savings for the years ahead.

ANDREW PROEBSTL is chief executive of legalsuper, Australia’s largest super fund dedicated to the legal profession. He can be contacted on ph 9607 9401 or or see

1. “The super iceberg: what’s beneath the surface of choice?”, 14 October 2008. See

2. “Investment performance, asset allocation and expenses of large superannuation funds”, October 2008. See


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