Superannuation account stapling is beginning to make its mark on the industry, benefitting some funds which have access to first-time workers, and putting pressure on others more focused on older employees.
But the true impact of the change is yet to come, potentially being felt more acutely with the impact of payday super in 2026, which will more directly link funds with the Australian Tax Office.
The move, to link employees with the one super fund unless they opt for a change, officially came into force in November 2021, but only began to have an impact a year later after a one-year grace period for penalties.
The change could accelerate the pressure on corporate funds to seek mergers.
Stapling has already been publicly cited by trustees of the $8.5 billion Qantas Super, as one of the reasons behind its plans to consider a merger in September 2023, coming on top of a challenging time when the airline lost significant numbers of staff due to layoffs as a result of the Covid shutdowns.
In a question and answer for members on the fund’s website, explaining the reasons for its decision to seek a merger partner, it notes that while the aim of stapling – to reduce the number of duplicate super funds- is a “worthy goal…one of the side effects of this change is that Qantas Super will not grow its new membership as much as previously expected.”
“Like any member-driven organisation, we need to be confident that we can sustainably deliver for our members now and in the future,” they told the fund’s 26,260 members.
“Due to a host of factors, as we project forward, Qantas Super looks like it will be less sustainable in the future than it is today and has been in the past.”
“As such we think our members would likely be better served by being part of a larger super fund with a broader membership and a healthier cash flow profile.”
The number of corporate funds has already shrunk from 761 in 2004 to current levels of only nine.
Young funds reap the rewards
The total number of super fund accounts in Australia has come down, from 24.4 million in 2020, to around 24 million in 2023, with account consolidation potentially offset by the growing number of workers.
The funds expected to benefit from stapling are those which have access to first-time under-25-year-old workers – retail industry fund Rest, AustralianSuper, hospitality industry fund, Hostplus and Australian Retirement Trust.
Analysis of funds flowing into super funds shows that those funds have been doing well compared with others, although some argue that it is too early to tell how much of this is due to stapling or other factors.
With a million workers changing jobs in Australia each year, the impact of workers being tied to their original super fund will increase over time.
“As a super fund looking after the retirement savings of 2 million members, including around one million Australians aged 30 or younger, Rest represents many of those who will benefit most from stapling,” Rest chief executive Vicki Doyle, told Investment Magazine.
“While it’s still early days, we believe that stapling is already having a positive impact in limiting the number of unintended new super accounts and helping to maximise the compounding returns delivered to members,” she said.
She said stapling “allows for a stable, consistent experience for working Australians, especially for the more than four million in part time, casual and seasonal work, and the nearly one million who hold multiple jobs.”
Doyle argues that stapling also “supports appropriate insurance for most Australians.
“Rest’s default insurance premiums are not impacted by occupation and only change as the member ages.”
Hostplus chief executive David Elia said it was still “early days” when it came to assessing the impact of stapling on different funds.
“It’s really difficult to offer an opinion on the full impact of stapling on the superannuation sector as it is not yet entirely clear and the evidence is not concrete to arrive at any firm conclusions,” he told Investment Magazine.
He says stapling benefitted employees by not creating multiple super funds each time an employee changes job, with the additional new fees.
“This is an incredibly positive outcome for the employee in terms of not having a multitude of super accounts being created and having their super balance eroded by multiple fees,” he said.
However, analysis of APRA data by The Conexus Institute* has found that across the sector account numbers are increasing, not decreasing. Total accounts increased by 860,000 in FY23, having increased by 326,000 in FY22, and having fallen by 687,000 in FY21, the analysis shows.
Though there could be a myriad of factors influencing this trend, including migration growth post-pandemic and population demographics, it may also suggest the YFYS stapling reforms are not yet having their intended effect.
‘Muted’ impact
AustralianSuper’s chief member officer, Rose Kerlin, said her fund is benefitting from stapling given its role as having the second largest market share of super members under 25, after Rest.
But she said the impact of stapling so far “has been more muted than what we expected.”
“The major reason has been the manual nature (of the employer having to make contact with the ATO to check out a news staffer’s fund).”
“There is a lack of interconnectivity between the ATO stapling service and the employers’ systems.”
But she said she expected this would change with the advent of pay day super in July 2026 which would see much greater connections between employers and the ATO on superannuation.
“The legislation for payday super is due to be passed and it will be implemented from July 1, 2026,” she told Investment Magazine.
“That will lay the platform for the full integration between employee onboarding solutions, payroll providers, clearing houses and the ATO stapling portal.”
“The combination will further streamline business processes, and create efficiency in compliance so business owners can get on with running their business.”
“This is when we are going to see the full impact of stapling.”
Other sources say that many employers have been coping with the change by giving onboarding employees a list of super fund options when they join.
This has led to them choosing from the list of options rather than the employer having to go to the trouble of having to contact the ATO to find out their new employee’s former super fund.
“With the odd exception, super funds have generally been saying to us that they have not seen a material reduction in the number of members as a result of stapling,” Travis Dickinson, retirement director with Towers Watson Australia told Investment Magazine.
“Part of the explanation for this might relate to the new employee onboarding processes that employers either had in place or introduced post stapling, which effectively force their new employees to make a choice with regards their preferred superannuation fund,” he said.
“Forcing new employees to make a choice, with the employer’s default fund being one of the choice options, means that the employer never actually reaches the point where they need to identify a stapled fund for a new employee.”
“We certainly know of some larger employers that utilise this type of onboarding approach.”
The question of small employers
Ian Fryer, the general manager of superannuation industry research house, Chant West, told a similar story.
“The ATO process for employers to find an employee’s stapled fund is time-consuming for employers, especially if it is required for multiple new employees,” he said.
“This has led many medium and large employers to introduce a ‘guided choice’ process where they provide an employee with a pre-populated choice form to select the employer’s default fund (generally the default fund helps with this process).”
“Making this course of action the easiest option for a new employee has meant that most new employees sign up to the employer’s new fund and create a new account, just like in the old default system.”
“This means that not much has changed from the pre-account stapling world,” he said.
But he said stapling was proving to be more important in the case of small employers.
Fryer said stapling would benefit funds that have existing default arrangements with employers, as well as funds that were the default fund for employers that hire new entrants to the workforce, such as Hostplus and Rest.
“While these funds have always got these new entrants to the workforce, some of them will not complete the guided choice form on starting with their new employer and will remain in their existing stapled fund.
“This is especially the case in industries dominated by many small employers.”
He said account duplication was being addressed in Australia, but largely through the process whereby super funds had to transfer small, inactive accounts to the ATO.
Other players ‘not concerned’
The chief executive of Vanguard Australia, Daniel Shrimski, said stapling was a “positive thing” by reducing the number of super fund accounts and the amount of money being paid out in fees.
The US index fund giant Vanguard launched its Australian super fund in November 2022.
But he said that potential members would still be interested in looking at other funds if they were offered a compelling proposition.
He said Vanguard was not worried about the impact of stapling, despite the fact that it was a new entrant to the market and thus, in theory, not favoured by legislation which encourages people to stay with existing funds.
“We think, over the long term, a compelling alternative that provides great brand trust, and great value (will still be attractive to potential new members),” he said.
“Stapling is not something which concerns us.”
“Our focus is on ensuring that our fund is the best it can be and ensuring that we are delivering great results and we think growth will take care of itself off the back of that.”
*The Conexus Institute is philanthropically funded by Conexus Financial, publisher of Investment Magazine.
