Funds need to be able to better explain their products and provide their members with guidance about the implications of changing investment options or changing funds. Members need to understand that switching to a conservative investment option or a deposit product can translate into real long term losses. The recent move by the Australian Securities and Investments Commission (ASIC) to allow temporary relief for funds on intra-fund advice restrictions is both timely and constructive. Super funds have long argued that they need to be able to provide better guidance on switching out of investment options or the transfer of money out of one fund into another.

For too long, funds have had to sit back and watch their members make decisions that they know to be illadvised or ill-timed. It is hoped that this measure will hasten reform in this area, with industry submissions currently before Treasury. Similarly ASIC’s industry consultation paper on end-benefit projections is another positive step. Benefit projections have the potential to provide a much-needed boost to member engagement and education, particularly if it they are linked a member’s actual investment option and pension entitlements.

Notwithstanding the current market turmoil and the gloomy economic outlook, super fund members need to understand the importance of having some exposure to growth assets. History tells us that younger fund members who flee to the perceived safety of more conservative cash options and end up remaining there for their working life are destined to be disappointed with their super payout on retirement.

Recent modelling by Vanguard Investments shows that a 30 year old who invested $10,000 in the sharemarket in 1978 as opposed to parking that money in cash, would be a staggering $430,524 better off at age 60. Over the long term, shares and property will return the best results for superfund investors. Unless this message is well understood, the super sector will be hamstrung in its ability to deliver the best outcome for its members and, indeed, the Australian economy.