Choice growing steady, says InvestmentLink
Choice of superannuation fund continues to grow with job turnover and account consolidation the key drivers, according to the latest data from InvestmentLink.
InvestmentLink chief executive Peter Philip said nearly 7 per cent of members had exercised choice through the SuperChoice electronic clearing service in the first 18 months of choice, a figure that contradicts earlier reports.
Last month Rice Warner Actuaries predicted no more than 2 per cent of members would initially exercise choice, with this figure not expected to rise above 5 per cent in the first year.
Philip said a more accurate reflection of the levels of choice when small to medium employers were taken into account was 10 to 15 per cent of the eligible population.
“Australians are clearly using choice as an opportunity to consolidate accounts by not opting for a new account when they start a new job,” Philip said. “And much of the impact of choice is building around employees who have changed jobs since July 1, 2005.”
He said the Australian Superannuation Funds of Australia estimates about six million Australians are eligible for choice. Philip said Australians using the SuperChoice service were opting for choice funds at a steady rate of about 5,000 a month. He said about one in four employees joining a new employer were making a choice not to opt for their employer’s default fund, which had profound implications for the industry.
The InvestmentLink data also found larger employers, who wear the greatest initial administrative pain with choice, have adopted choice-enabling technology first. Medium-sized employers now experiencing the administrative pain are following to ease the workload. However, smaller employers are handling choice administration by labour-intensive cheque and schedules.
Philip said primary structural impediments to portability were inherent in the system rather than providers causing obstructions, but structural flaws were now being tackled by the Government with bipartisan and regulatory support.
InvestmentLink provides clearing services for more than 30,000 employers paying $5 billion on behalf of nearly 1.2 million members via super funds as diverse as AMP, AAS, ING, Mercer, AXA, Asgard wealth solutions, CBA, IOOF and IBM. InvestmentLink is part of the CPS Group.
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