Not so super: Why superannuation disruptors are folding

The number of Millennial-targeted super funds continue to fall by the wayside, halving to just 14 nearly a decade after attempting to disrupt the superannuation sector.

Touted as pioneers in the super industry, the likes of Future Super and Virgin Super burst onto the scene in 2014, followed by Grow Super, Spaceship, Crescent Wealth, Human Super and Zuper.

Rainmaker Information analysis shows that at their peak, 30 challenger brands tried to take on established industry and retail funds, hitting $3.8 billion in funds under management and capturing 0.12% of the market.

At the end of 2022, Rainmaker found there were 14 providers left and, in the first few weeks of 2023, several more closed their doors.

In recent years, Zuper, BrightDay, GigSuper, Max Super, Good Super, Super Prophets and FairVine (formerly Human Super) folded.

Backed by heavyweights such as Citigroup and IOOF, Grow Super grew to $47.18 million in FUM but ditched its superannuation offering, pivoting instead into administration and blockchain technology and rebranding as Grow Inc.

GigSuper had less than 200 members and $2.8 million in assets before shuttering, while women-targeted start-up FairVine, a sub-plan of Aracon Super, quietly shut down after three years.

COVID-19 and stringent superannuation red tape were perhaps the final nails in the coffin for many now-defunct start-ups.

Emergency measures introduced by the government in 2020 enabled members to withdraw up to $20,000 from their accounts, making many providers vulnerable, says Alex Dunnin, executive director of Rainmaker Information which publishes Money magazine.

Stapling, which kicked off in 2021, tied young members to the first superannuation fund they joined and also made it harder for disruptors to attract new members.

"But poor product design didn't help either," Dunnin says.

"The median expense ratio for disruptor superannuation products being 1.15% p.a. was 10% higher than the Rainmaker 2022 MySuper fee benchmark of 1.06% p.a. Their high fees were a symptom of their lack of scale."

Those still left standing - Future Super, Virgin Money, Spaceship, Crescent Wealth and Verve Super - account for 82% of the cohort's FUM, with Future Super currently growing at the fastest rate.

"The major characteristic of these surviving disruptors is a clearly delineated product theme - four of the segment's five largest products are heavily identified with ESG [environmental, social and governance] with others heavily focused on technology investments," he says.

This article first appeared on Financial Standard

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