Membership drop puts pressure on fees

Falling superannuation membership numbers may cause third-party providers to re-examine fee structures, according to Super Ratings.

Overall superannuation membership numbers have fallen for the first time in Australia's superannuation history, with funds experiencing a 1.5 per cent average reduction for the year.

Super Ratings said 15 per cent of funds lost over 5 per cent of members in the June quarter, while one lost more than 175,000 members or 14.6 per cent of its membership over the year - a reflection of member engagement campaigns.

Small account transfers to the Australian Taxation Office (ATO) during the June quarter wiped out any membership growth in the preceding three quarters. However, funds under management rose 16.6 per cent over the year while contributions climbed 1.9 per cent.  

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Super Ratings said the shift might cause some funds to re-consider fee structures.

"The first year of declining membership numbers may be the impetus for a range of providers, particularly third-party superannuation fund administrators, to consider the manner in which they charge for their services, given that increasing revenue forecasts are likely to have been driven by assumptions surrounding continued membership growth within the industry," said Adam Gee, Super Ratings head of consulting.

Life insurers may have priced-in expectations about membership growth in determining overall premium rates for many larger super funds, Gee said.

"Combined with recent poor claims experience, the overall reduction in the number of lives insured (and resulting total sums insured) are likely to suggest that insurance margins and overall insurer profitability will continue to be squeezed," he said.

The Government's intention to ramp up the ATO account balance transfer figure suggests continued pressure on super funds' membership numbers, Super Ratings said. An overall reduction in membership was likely to result in further increases to the median cost per member this year - and it had already increased 7.6 per cent between 2011 and 2012.