Simplicity of super fund more important than fees and returns

Simplicity, advice, and environmental, social and governance (ESG) considerations are some of the most important factors when members choose superannuation funds, according to a State Street Global Advisors (SSGA) report.

SSGA’s latest global retirement report found that the investment returns and fees of a super fund were less important than the fund’s simplicity.

While investment returns and fees were mathematically critical to generating solid retirement outcomes, the calculations were useless if members did not understand enough to engage.

“What we witnessed in our survey was a strong local and global focus on simplicity and ease of use over and above investment returns or fees,” the report said.

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The report found 37% of employers said ‘making sure it is easy for employees to use and understand’ a super fund was the more import when it came to selecting a provider.

Another 27% said it was ‘making sure the plan is easy for the employer to implement, maintain and monitor’, 22% ‘minimising cost and/or fees charged’ was most important, and 14% said it was ‘ensuring the plan offers an appropriate range of investment options’.

The report also found that over 60% of Australian employers thought their employees place a high value on access to advice.

“As more of the global pensions industry moves from older defined benefit to defined contribution designs, the questions the Australian industry has faced over advice have become global questions,” it said as Australia was not alone on this issue.

ESG considerations were also high on the list as 61% of employers said it was important that their investments incorporated companies with ethical values.

“As battles for employer default fund status are waged over the coming years, we believe that funds with a clear ESG proposition for both employers and prospective members will start with an advantage over their competitors,” the report said.

“We believe that firms that adhere to environmental efficiency, social awareness and the highest governance standards are well-positioned to withstand emerging risks and capitalise on new opportunities.”