Industry funds seek onboarding primacy for defaults
Industry superannuation funds have backed legislative amendments which will have the effect of giving primacy to default and stapled funds ahead of advertised alternatives.
The Super Members Council (SMC) has used a submission to the Senate Economics Legislation Committee to argue that when new employees are being onboarded by employers stapled funds and default funds should be displayed more prominently than advertised products.
Pointing to its support for legislative changes, the SMC said that under current laws there is evidence of conflicted advertising occurring that is not in members’ best financial interests.
“Media outlets have reported on the serious risks of consumer harm including one employee onboarding platform encouraging employees to join an underperforming super fund with high fees that was also a related party of that onboarding platform,” the SMC submission said.
“The status quo prioritises commercial interests ahead of consumer protections and the objective of superannuation to deliver the strongest retirement incomes for Australians to live a dignified retirement. It also conflicts with the consumer protection principles that underpin the best financial interest duty and sole purpose test,” it said.
The SMC submission argues that that without proper safeguards, including reasonable disclosures, Australians “can be pressured into making uninformed decisions, led to believe they must follow a certain choice, open a needless duplicate account and end up paying two sets of fees, and be encouraged into an underperforming, high-fee super fund that makes them poorer in retirement”.
The submission also paid respect to the superannuation fund stapling legislation passed by the former Morrison Coalition Government noting the benefits it has delivered.
“Since stapling laws were passed, the share of Australians with their super consolidated into one super account has risen from 74% in 2020 to 78% in 2024. The changes proposed in this legislation further build on that strong progress towards a simpler, fairer and lower-cost super system for all Australians,” it said.
“Treasury estimates a full ban on onboarding advertising could save members between $17 million and $117 million per year from avoiding underperforming products, plus additional savings ($3.3 to $56 million per year) from fees saved by having fewer duplicate accounts.
“Those losses are borne disproportionately by disengaged and lower‑income workers. From a consumer‑protection lens, that is a pressing hidden cost,” the SMC submission said.
The best way for an informed decision to be made is to offer personal advice to an onboarding g member. Being in the wrong portfolio because it’s stapled and easy is a really poor alternative. To be able to offer personal ( not general ) advice funds have to use technology to get scale and make the advice affordable. That’s where digital advice can achieve a better outcome for Australians but at the moment funds are toying with ‘nudges’ for the retirees and quite inept calculators for others. Very ittle attention is paid to the younger members and yet their needs are as important. Check out the digital platform market and the solutions are there for a few dollars a year : yet millions is spent on advertising …
Personal Financial Advice should be offered, but it needs to be independent of the Industry Funds and their trustees of singular products that are only interested in clipping their own products ticket.
Industry Funds must stop lobbying the Government to seek more ways to monopolise and misinform clients as we know they all have a massive conflict of interest