Putting aside the millions of dollars budgeted for advertising, Australia’s new choice of superannuation fund regime appears to have been introduced with a whimper rather than a bang.
While it is now barely a fortnight since the new regime was introduced on 1 July, the level of churn being experienced by Australia’s superannuation funds can be counted in low single digits — something which is consistent with the predictions of a range of expert analysts, not least the Association of Superannuation Funds of Australia’s Ross Clare.
There were those who always viewed choice of fund as being the 2005 equivalent of the Millennium Bug, the only difference being that Australians held parties of epic proportions to welcome in the new millennium, while very few people held parties to welcome in choice of fund.
The reality is that any celebration would always have been premature. The real churn will begin being felt in 12 to 18 months’ time as people become more familiar with the new regime, particularly the requirement upon employers to provide choice forms to their employees.
What is already evident, however, is that the advent of choice has already had a direct impact on fees, with major institutions opting to lower fees across key platforms.
This is something that was remarked on by Citigroup in a recent analysis, where it pointed to the fact that AMP Limited had reduced fees across three of its products.
But fees are not the only issue that will come into play as people choose a superannuation fund. So too will the level of service provided by funds — something that was pointed out by the Investment and Financial Services Association (IFSA), utilising research conducted by Chant West.
The Chant West data, published elsewhere in Super Review, makes clear that, by and large, retail master trusts provide better service levels in a range of areas, including investment choice, unit pricing and the timing of member statements. Little seemed to separate the retail master trusts from industry funds when it came to call centres or insurance choice.
The only problem for IFSA in selling its message about retail master trusts offering better service levels is that other survey data suggests that, to date, Australian superannuation fund members haven’t been all that interested in a wide range of investment choices, with most opting for the default option.
It is, of course, early days in the new choice of fund regime, and it is probably sensible to expect that it will be late 2006 before we see statistical data indicating any meaningful change in the status quo.
