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Superannuation: Who’s responsible?

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Cite as: (2009) 83(03) LIJ, p.82

With the advent of fund choice there is a grey area when it comes to the ultimate responsibility for employees’ super.

When super was made compulsory in 1992, the then federal government initially legislated that employees were required to use the super fund nominated by their employer, otherwise known as the “default” fund.

This effectively put the responsibility for selecting the most appropriate super fund onto the employer and, along with that decision, responsibility for assisting employees to understand their super obligations and rights.

In 2005 this legislation was amended to give most employees the right to choose their own super fund.

This shifted the balance regarding the “choice of fund” to the employee. Employers continued to be required to offer a default fund for employees who failed to make their own choice.

Some people saw this shift as an important milestone on the road toward greater financial maturity, an acknowledgment that after 12 years of compulsory super it was time for employees to start taking more responsibility for their super.

This view was supported in recent research commissioned by legalsuper through Sweeney Research.

This research, conducted in 2008 through interviews with legal employers, showed that some employers spent as little time as possible choosing their default fund, and most did not periodically review their current fund.

Some employers surveyed saw choice of fund as an employee decision and generally only chose a default fund to satisfy their legal obligations, placing less emphasis on whether the default fund was well run or performing strongly.

There was some evidence of employers taking a “set and forget” approach, with most still using the same default fund they selected in 1992, with no intention to review or change.

However, while employers believe super is largely the responsibility of employees, employees don’t seem to share this view.

Over 85 per cent1 of Australian employees continue to accept their employer’s choice of fund. Accordingly, it is likely that some employees assume their employer conducts periodic reviews of the default super fund to ensure it is appropriate.

This difference of opinion has implications for both employers and employees.

For employees it’s a reason to take more interest in the fund in which their retirement savings are invested.

Is their current super fund appropriate, particularly considering the current fall in investment markets and the wide variation in returns between funds, with industry funds consistently performing better than retail funds?

According to the SuperRatings, during the first five months of the 2008/09 financial year there was a gap of more than 14 per cent between the highest return (of negative 6.47 per cent) and the lowest return (of negative 20.69 per cent).

If an employer’s default fund is in the bottom quartile, that employer will want to be ready to respond to any questions from their employees as to the rationale for using that fund.

For employers it may be a reason for them to examine their default fund decision-making process and quite possibly the appropriateness of their existing default fund.

At the same time, while employers may want their staff to take greater responsibility for their super, many employees may need help to do so. This is where employers should be turning to their default super fund for help.

The default fund can provide information and education to employees of the firm, ideally on site by way of seminars, face-to-face meetings and education material.

Any default fund worth its salt will educate and advise its members. If the fund is unable or unwilling to provide this type of support, employers should change funds. After all, it’s a competitive world out there.

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. Stephen Bartholomeusz, “Industry super funds in AIRC bonanza”, Business Spectator, 7 January 2009.


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