Super Switching: They Wanted It… Now They Don’t?

For the last few years the government has been pushing SuperStream and other reforms as a way for members to easily “super switch”. That is, you can leave one fund and join another in a much more seamless way than before. The Australian Taxation Office has been a key driver of this, with initiatives like SuperStream designed to streamline rollovers and reduce friction  They’ve also required funds to report performance more transparently , so members can actually see how their super is tracking year to year.

This all sounds good in theory, right?

If switching is easy and performance is visible, then in theory that should give more power to individual members. You can compare funds, make a call, and move if something doesn’t stack up.

But recently we’ve started to see a bit of a different tone.

Some of the larger players — particularly the big industry funds — have started kicking up a bit of a stink about members leaving. Data referenced by the Super Members Council points to more people switching out, including younger members with lower balances moving into retail funds or SMSF’s. The argument being that this trend is risky and that the system needs tightening.

Part of that concern centres around where the money is going. There’s been a lot of noise about members ending up in more complex or “riskier” investments — particularly where switching leads into platforms or SMSFs with a broader range of assets. Once you move away from a standard diversified fund, outcomes can vary a lot more.

But it also raises a pretty obvious question — if the system has been redesigned to make switching easier, why is it suddenly a problem when people actually start switching?

For years, these union linked funds have benefited from default contributions and low engagement. Money flows in, members don’t really look at it, and balances just grow over time. Now that members can actually see performance and move more freely, behaviour is starting to change — including more people exploring SMSFs for greater control.

It’s also worth noting that a lot of these funds operate on a percentage-based fee model. So when money leaves, revenue leaves with it. That doesn’t automatically make their concerns wrong, but it does add context.

At the same time, the other side of the industry is pushing back. Retail platforms are saying their data shows members switching are typically older, with higher balances, and are looking for control — not just chasing risk.

So depending on who you listen to, switching is either a growing risk… or just members becoming more engaged.

Reality is probably somewhere in the middle.

Disclaimer – The content has been prepared by Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only.