Millennials’ increase in fund balances has occurred at the same time as Pre-Boomers – those born before 1946 – have seen their share nearly halve.

Given that Pre-Boomers are now in the decumulation phase of their retirement, their falling share isn’t that surprising, Roy Morgan Research’s Norman Morris said.

However: “This research has shown that due to the compulsory nature of superannuation, Millennials, Generation Z and Generation X are where the greatest growth potential now lies.

“It is a major challenge for superannuation funds to engage the younger generations in a long-term issue such as superannuation, when they are most likely to have shorter-term priorities such as housing affordability and lifestyle,” he continued. 

At the same time, super funds and their members need to contend with changes to the rules governing superannuation and “difficulties in accessing funds”. 

He argued that these factors are “likely to be contributing to a general lack of engagement by the young in superannuation.”

“The very low satisfaction levels among the younger generations of around 50 per cent are likely to lead to low brand loyalty and engagement. Industry funds with their higher satisfaction levels should have a growth advantage over retail funds if this lead in satisfaction with performance can be maintained.”

In the six months to September 2017, Millennials – who Roy Morgan defines as those born between 1976 and 1990 – possessed 14.6 per cent of superannuation funds in dollars. That’s up from 6.4 per cent in the six months to September 2007 and constitutes an increase in funds held of $226 billion.

Generation X (born 1961-1975) has seen the greatest growth in fund balances, from a 27.5 per cent share of combined super fund balances to 36.2 per cent. Baby Boomers (born 1946-1960) have seen the greatest fall (-12.1 per cent) from a 51.8 per cent share to 39.7 per cent.

Aussies happier with industry funds but SMSFs a ‘major threat’

The research also revealed that in the six months to September 2017, satisfaction with industry funds’ performance nudged out retail funds, with 58.5 per cent compared to 56.9 per cent.

However, while industry funds retained their lead, satisfaction has fallen by 1.4 per cent over the last year while satisfaction in retail funds has increased by 0.7 per cent.

Roy Morgan noted that all generations except Generation Z expressed greater satisfaction with industry funds but overall satisfaction with both fund types increased with age.

Pre-Boomers were 79.3 per cent satisfied with their industry fund compared with 54.7 per cent for Millennials and 46.1 per cent for Generation Z. Likewise; retail funds achieved 76.2 per cent satisfaction with Pre-Boomers. Millennials were just 50.6 per cent satisfied with retail funds and Generation Z were 54. 3 per cent satisfied.

Roy Morgan explained that younger generations’ lesser satisfaction with their funds could be tied to their lower average super balances, “as illustrated by the fact that the average balance for Pre-Boomers (the oldest group) is $289,400 and gradually declining to $16,600 for Generation Z (the youngest generation)”.

“The average balance held by Millennials currently is $59,500, well up on their average of $17,300 in 2007.”

Regardless of satisfaction levels, SMSFs pose a challenge for both retail and industry sectors, Mr Morris added.

He said: “A major threat to both industry funds and retail funds are self-managed funds which have much higher satisfaction and average balances and are currently the biggest sector of the market.

“Retaining and attracting high balance superannuation members therefore represents a major challenge to both retail and industry funds,” he concluded.