Default fund choice can pay off
AN enduring myth regarding super is that those who are in a default fund are probably “disengaged” with their super.
In reality, many members would have concluded that their employers’ default fund is appropriate for their circumstances. In other words, they have thought about their superannuation and made a decision.
This decision-making certainly does not equate to being disinterested in their retirement savings.
Ross Clare, director of research for the Association of Superannuation Funds of Australia (ASFA), picks up this theme in the latest issue of the association’s magazine Superfunds.
In his article headed, A Lifetime of Choice, Clare writes: “Some commentators have asserted that 80% of fund members do not exercise fund or investment choice and, they say, it makes sense not to offer such members investment choice or ‘bells and whistles’ options.”
Clare argues that researchers have to ask the right questions otherwise misleading conclusions can be reached about a member’s degree of interest in super.
“For instance, data on the incidence of people changing fund or investment options tells you very little about whether people generally chose the fund or investment option in the first place,” he adds.
“It would be just as misleading to say that because only a small proportion of people move house every year, they do not care where they live.”
Clare points to the findings of a survey by researcher brandmanagement that was commissioned by ASFA to try to quantify the level of member engagement. In May, the researcher surveyed 600 people in the workforce aged 25 to 69.
And significantly, researchers asked those participating why they had chosen their super funds.
Almost 28 per cent of respondents in a default option had felt it was the best option for them and “went there by choice”.
So much for disengagement.
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Robin Bowerman, Vanguard Investments Australia's Head of Retail, has more than two decades of experience in the finance industry as a writer, commentator and editor.