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Finding Lost Super

Finding lost super involves more than just putting people in touch with their super funds – it’s an  endless chase for lost members, a race against time for information and a tale of consolidation, Ruth Liew reports.

Welcome to a world where a super fund’s success is measured by how little money they have, and how many members they transfer out of their fund.

Where investments are gladly handed back to other super funds and a firm’s ultimate achievement is to shut its doors for good.

Eligible Rollover Funds, or ERFs as they are known in the industry, have been around for nearly as long as super funds have been losing members due to address changes, job hopping and apathy towards super, to name a few.

But uncovering ERF operations involves more than just a story of putting John Smith back in touch with histhinking super fund.

On the contrary, the debates on fees, trustee responsibilities and performance rage just as fiercely in the $13 billion lost super industry as in other areas of wealth management.

Some could argue that $13 billion, while a large sum in dollar terms, is a tiny 1 per cent of the $1.3 trillion superannuation and investments industry. That kind of “inefficiency” is broadly in line, if not less so, than say, the amount of electrical power you waste when switching off a light bulb.

Put another way, the industry could gain more from tackling far bigger problems such as recouping the 20 per cent plus losses last year and the cost of investments.

But if you understood what the numbers meant, the issue becomes far more serious.

According to last year’s statistics, there are 31.7 million super accounts for 11.4 million adults. That means every working Australian has an average of three super funds.

No surprise there as the industry will continue to battle multiple accounts especially as people change jobs more often. What is concerning though is that of those 31.7 million accounts, a high 20 per cent or 6.4 million are in “lost super”. That means 20 per cent of superannuation accounts are effectively “lazy money”.

And if Deloitte forecasts this year are to be believed, the superannuation sector is set to grow to $7 trillion in 20 years. If the industry sits on the current status quo, lost super would amount to $70 billion by 2028 – bigger than the current size of the Future Fund.

“There’s no question that lost super is a major problem in Australia the fact is that there are customers out there with more than 10 funds to their name, paying multiple fees,” said Andrew Hobern, AMP director of personal wealth management.

Industry snapshot

According to Rainmaker Information, there are 16 ERF’s in Australia that make up more than $5   billion in assets from more than five million member accounts. SuperTrace ERF, which has $1.5   billion in FUM, holds the largest slice of sector with a 30 per cent market share.

By contrast the largest ERF by member accounts is AUSfund, with 1.8 million members in its fold.

There are customers out there with more than 10 funds to their name, paying multiple fees.

Article from The Australian Financial Review

 

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