The inertia of fund members who do not have the financial literacy skills to make informed choices can be considered a friend to the superannuation industry, according to Russell Superannuation managing director Linda Elkins.
One in two Australians do not have the skills required to make informed choices in their interactions with the financial services sector. Therefore, the default investment option offered by superannuation funds can be considered a positive outcome for these individuals, Elkins said.
“Offering a default is embedded advice, so we estimate that 80 to 90 per cent of members are actually in default options, and at the end of the day I personally don’t think that’s a bad thing,” she said.
“By using defaults we’re actually enlisting inertia as our friend, so we’re focusing all of our effort on helping those people who might be the exception to the rule to opt out, or providing comfort to the people who are in a default.”
Default investment options of superannuation funds have generally delivered very good results for members, Elkins said.
“A proportion of members are not interested or not capable of making some of the decisions required, so what that means for us is we have a very real responsibility in terms of the way we either make advice available, or we offer default arrangements within our funds,” she said.
“A lot of the work we have done in comparing different investment options to the 70/30 default option haven’t really shown an exponential difference.
“So I don’t think we should be afraid to actually say what we’re doing right now really is a good outcome for individuals.”
