Long an issue of concern for super funds, member engagement has become even more critical for the super industry as we brace ourselves for the very real possibility of negative returns for the second year running.

After more than half a decade of solid returns, one could argue that most Australians – especially those some years away from retirement – could be expected to calmly absorb the news that their super had dropped by an average of 6.4 per cent last financial year. But what if 2009 returns continue to disappoint? Will the drift to cash continue and will inter-fund switching increase?

Feedback from the not-for-profit sector of industry, corporate and publicsector funds is that member movement into cash, while notably higher than recent years, is still relatively small as a proportion of total membership. In the case of one large fund, a doubling in the numbers of members switching across to its capital-guaranteed option amounted to a rise from 1 to 2 per cent of members invested in this option.

Furthermore most fund members have remained in the ‘default’ investment option of their fund which, in most cases, provides a reasonably high exposure to equity and property assets. In some cases, more than 95 per cent of not-for-profit fund members choose this option. During the worst of the market falls this year, member enquiries increased at call centres around the country, but no where near to the level that many funds were anticipating. Indeed, many funds hiring extra staff for an anticipated rise in member enquiries found this measure was largely unwarranted.

Fund communication strategies – well in place before the start of the economic downturn – appear to have contributed to a greater understanding and acceptance that super is a long term investment and that market volatility is part of the package. Industry wide campaigns as conducted by the Industry Super campaign have also assisted in getting the message across. Many individual funds have been successful in targeted campaigns to older members. But the industry knows it can’t afford to be complacent.

Just when many Australians need to be putting more into their super to ensure a comfortable retirement, the poor market performance is leading to increased doubt and less participation. Many working Australians are expected to stop making voluntary super contributions, with one recent poll suggesting that nearly 10 per cent of fund members have done so already. It’s clear that confidence in our system can no longer be simply addressed by the mantra of “super is long term investment”.

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