Bigger doesn’t equate to better when it comes to superannuation funds according to consumers, with research from CoreData showing small fund members are more prepared for retirement, more satisfied, more engaged and have a “much more positive sentiment” towards their fund than large fund members.

The finding comes while small superannuation funds are increasingly marginalised due to economies of scale and pressure from APRA. At least 28 mergers have taken place across the superannuation landscape since 2014, with more likely on the way as the incoming Your Future, Your Super performance test puts more pressure on small funds.

In the second iteration of its Best Possible Retirement survey of 4,288 consumers over the age of 45, the researcher split respondents into small fund (<$20 billion in assets) members and large fund (>$20 billion in assets) members, with key components of a successful retirement given an index score from zero to 100.

The survey found small fund members are more prepared for their retirement by a index margin of +6.3 over large fund members, and more satisfied when they reach retirement by a margin of +5.3.

Small fund members are also more optimistic (+15.4) and are more able to afford the things they want (+18.7) than large members, while enjoying a much higher standard of living (+20.7).

In the sentiment section, small funds easily outscored large ones is areas like trust (+11.4) caring (+12.4).

The only thing large funds scored higher on was apathy; when given a list of things that members can do to prepare for retirement such as reading information or visiting a financial planner, 35.8 per cent of large fund members had done nothing compared to 27 per cent of small fund members.

“Members of small funds feel much more positive towards their super fund. They believe their fund is much more interested in helping them, and that it delivers them a higher level of service,” stated CoreData principal and founder Andrew Inwood, who added that small fund members were “more active and engaged” with their fund.

By being engaged and having a greater sense of control over their superannuation, small fund members are also more able to concentrate on their health and well-being according to CoreData.

“With trust in their super fund, being more actively engaged in their super, and having developed better savings and money-related habits, it is no surprise that members of small funds are more optimistic than members of large funds about their retirement,” Inwood stated.

The fee cost

The research highlights a competing dynamic in the direction super is taking and the policy around it. People tend to engage with small funds in a more positive fashion with healthier results, but there is a fee cost involved.

According to the Productivity Commissions and consumer groups, more super fund mergers can only help consumers.

The Productivity Commission’s report into super (that led to the Your Super, Your Future proposal) found that mergers would let funds provide services to members at a much lower cost, because smaller funds found it hard to reduce fees and remain in the system.

Subsequent analysis by Super Consumers Australia found that recent mergers had indeed delivered lower average fees to members. Of the funds that merged between January 2018 and October 2020, fees were reduced by an average of 13.4 per cent according to SCA.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at [email protected]
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