There is a shift at work in Australia’s industry funds, a shift from the onboarding of new members and being the lowest cost provider, to member retention and member engagement.
There are a number of forces driving this behaviour – but the three big ones are demographics, economics and consolidation.
The demography of Australia is changing and this is having a big impact on super funds. Super funds grow in two ways; one – the net number of new people joining the workforce and two – when people choose to leave one super fund and join another fund.
At the moment the number of people joining the workforce is relatively low, but because of the casualisation of labor – job switching is higher. That means that the net number of new superannuation members is relatively low and the value of people joining the fund is low too – because job tenure and therefore member balances are relatively low.
At the moment our population growth is higher than normal – up from 1.25% a year in 2012 to 1.6% a year in 2016. But the truth of this is we aren’t having more babies – we are importing more people – 0.9% of the 2016 growth figure is people moving to Australia and the bulk of them are on visas which means they have jobs and jobs means super funds.
But 0.35% a year growth isn’t enough to maintain a super fund, especially when the mortality rate of Australia is 5.5%. It doesn’t even equal replacement.