New research has revealed an alarming spike in the number of Australians with very small super balances and no pre-existing advice relationship now being switched at scale out of the safe, high performing, tightly regulated super system into more expensive and potentially riskier super products.
The new data should sound alarm bells about drivers of large-scale, higher-risk super switching where it makes Australians poorer. It highlights the need for stronger guardrails to protect Australians from financial harm.
Released today by the Super Members Council, the new aggregated de-identified data shows recent switching activity from mainstream, high performing, tightly regulated funds to SMSFs and platform products has accelerated sharply – up 17% over the past year.
It also shows switching is now being dominated by Australians with lower super balances, not by wealthier pre-retirees.
In 2024–25, a concerning 68 per cent of Australians who were switched out of five large, high performing, safe, profit-to-member funds into for-profit platform-based super funds, had under $100,000 in super, and 80 per cent had under $200,000.
A similar pattern is occurring among Australians with limited amounts of super switching into SMSFs, with more than half having under $100,000 in super and three in four had less than $200,000.
More than 70% of platform switchers and 61% of SMSF switchers hold under $100,000, with an average balance of just $21,700.
Seven in ten members switching did not have a pre-existing advice relationship, suggesting this activity could potentially be being driven by social media ads, lead generation or third-party influences and not by long-term professional financial planning in their best financial interests.
“Healthy competition and choice are long-term features of Australia’s super system, but that is not what appears to be occurring here,” said Super Members Council CEO Misha Schubert.
“Access to trusted quality advice is very important to Australians’ financial wellbeing and to their confidence at retirement - and great advice from a professional financial adviser can make a very positive difference.
But the patterns in this switching data suggest the effect of other influences – especially for young people with small balances and a high number of people without a pre-existing trusted advice relationship.”
“Alarm bells should be ringing loudly for both regulators and policymakers if a surge into complex super products is making Australians with lower super balances poorer – and especially if there’s a risk that any predatory operators could be driving it.”
Younger Australians are over-represented in this escalating picture of risk. Around half of all members switching to platform funds or SMSFs last year were aged under 45, with switching activity growing rapidly among people aged between 30 and 45 with smaller amounts of super.
The ATO this week announced it is scrutinising the 93,000 trustees of SMSFs who had not filed a tax return and issued a serious warning on illegal loans and illegal early withdrawals via SMSFs, and ASIC last week announced a major review of businesses using lead generators.
Once switched, the cost and performance differences for Australians with super can be significant.
The Council’s analysis shows that members switching to platform based super funds and SMSFs face over $160 million extra in fees and costs per year compared to if they had stayed with their profit-to-member fund.
Investment and net return performance differences for members are also significant - over both five and ten-year periods, members in profit-to-member funds have seen their performance consistently outperform retail platforms, with the gap widening over longer timeframes.
For lower balance members, these differences can mean less in their retirement savings, particularly when members are switched out of a higher-performing super products early in their working lives.
The Council has called for a strong package of consumer protections that remove any conflicts of interest – including eradicating any hidden paydays - wherever they arise in the chain of complex entities across super, investment vehicles and advice, and strengthening safety obligations on any process that involves switching a person’s super.
It has also called for a ban on aggressive selling tactics through social media ads and cold calls by expanding anti-hawking laws to prevent contact aimed at generating or transferring leads for personal financial advice or super.
“Australians urgently need a comprehensive set of consumer protections, or we risk further Shield and First Guardian-style collapses, which means more Australians losing money they have saved to live on in retirement,” Ms Schubert said.
“Platforms and SMSFs are often typically more complex and costly products, and many don’t face the same levels of performance testing or regulatory oversight as mainstream super funds, which can be a particular risk for Australians with smaller amounts of super.”
About us:
The opinions above are those of the author in their capacity as spokesperson for Super Members Council of Australia (SMC). SMC, the authors and all other persons involved in the preparation of this information are thereby not giving legal, financial or professional advice for individual persons or organisations.
