Reaching the self-employed

How do super funds attract the self-employed into the super system?

The finding of an effective answer to this straightforward question should be highly rewarding for both the super funds and for the many self-employed with little or no super.

A recent research paper by the Association of Superannuation Funds of Australia (ASFA), The Self-Employed and Saving for Retirement, reports that about 28% of the self-employed have no superannuation savings while another 53% have super balances under $40,000.

And Ross Clare, ASFA's research director and author of the research paper, had concluded: "Public-offer superannuation funds are in a position to market superannuation to the self-employed. There would appear to be considerable scope for expanding such business across of a range of self-employed."

In the August issue of Superfunds magazine, published by ASFA, journalist Michael Laurence asks super fund executives, specialists in superannuation trends and promoters of superannuation for their ideas about how to reach out to the self-employed. Their responses make fascinating reading.

Two of the basic challenges for super funds in reaching this market are that the self-employed, unlike the employed, are not beneficiaries of the compulsory super contributions, and they are not grouped together like employees.

Without doubt, the self-employed can be an elusive bunch for a super fund to contact.

And once a super fund manages to communicate with the self-employed, it can be a tough challenge to persuade them to contribute. A self-employed person is often struggling to either make ends meet or wants to plough all available money back into expanding their businesses.

David Atkin, chief executive of Cbus Super, told Superfunds magazine that a way for funds to reach out to the self-employed was to emphasise how super fund membership can meet some of their immediate, practical needs such as obtaining competitively priced, income-protection insurance. (Cbus is a public-offer industry fund with a specific focus on the building and construction industries.)

"The fact that we have 500,000 members means we can get group rates [for salary continuance and other forms of insurance] at premiums that an individual could never get," Atkin says. "Income-protection insurance is obviously something they think about."

Michael Rice, director of actuarial and superannuation consultancy Rice Warner, told Superfunds that, in his opinion, groups like ASFA should advocate mandatory super for the self-employed.

Rice regards the fact that so many of the self-employed are out in the cold when it comes to super as a "tremendous defect" in Australia's super system.