Corporate funds safe with choice regime

Corporate superannuation funds have little to fear from the new choice of fund regime, according to research conducted by independent superannuation group, The Heron Partnership.

According to The Heron Partnership's analysis, corporate superannuation funds have little to fear from choice because the vast majority of members "will see the sense in remaining with the buying power of their employer fund".

It says the difference between staying with a company fund and moving to a personal retail fund could be as much as 34 per cent.

"As an example, the retirement benefit of an employee in a small to medium business company fund - with 30 years to retirement - will be 25 per cent more at retirement if he stays with his company fund rather than move to a personal retail fund," it says.

"This same person, if employed in a large company will be 34 per cent better off due to the improved 'buying power' of his larger employer," the Heron research says.

However the Heron Partnership's managing director, Christopher Butler says corporate funds will need to ensure that they are able to offer the range and flexibility of options members expect at a wholesale price.

However Butler says the introduction of choice will not result in large scale movement by employees from their employer's superannuation fund because employees will have little incentive to leave a well-structured fund.

"Employees moving from their employer's fund will potentially lose the buying power that comes from being part of a bigger group, which impacts in particular on costs and automatic insurance coverage," he says.

"Buying power is critical in a choice environment and individuals have negligible buying power," Butler says.