Status Quo Bias: Why Doing Nothing Is Costing You Money

🪑 What is status quo bias?🔗

Status quo bias is a preference for the current state of things that goes beyond what the evidence justifies. Not laziness, and not ignorance. A genuine pull towards leaving things alone.

William Samuelson and Richard Zeckhauser named it in 1988, in a paper in the Journal of Risk and Uncertainty. They ran experiments where people were handed a portfolio and invited to rearrange it. Whenever one option was labelled the current holding, people kept it at rates no amount of logic could account for. The default simply won.

Three years later Kahneman, Knetsch and Thaler connected it to two things you may already know. Loss aversion makes giving up your familiar insurer feel like a loss rather than a swap. The endowment effect makes your current fund, plan or rate feel more valuable than it is, purely because it is yours.

☑️ Why defaults are so powerful🔗

Consider organ donation. If the form asks you to tick a box to opt in, most people do not tick it. If the form asks you to tick a box to opt out, most people do not tick that one either. Countries with opt-out systems consistently register far more donors, not because their citizens value it differently, but because the box changed sides.

Retirement saving tells the same story. When employers switched from opt-in to automatic enrolment, participation jumped, which is the finding that made nudging famous. People do not pick the best option. They pick the one that requires nothing of them.

Australian super runs on precisely this. Your employer defaults you into a fund and into that fund's default investment option, and for an enormous number of people that is the last time either is ever considered.

🧾 The loyalty tax🔗

The loyalty tax is the gap between what you pay as a long-standing customer and what the same company would offer you as a new one. It is most visible in insurance, energy and home loans.

It is not sinister, it is arithmetic. Companies know most customers will not move, so the sharpest pricing gets pointed at the people who might: new arrivals, and anyone who picks up the phone and threatens to leave. Everyone else drifts, slowly, towards worse terms, one quiet renewal at a time.

Your renewal notice may show last year's premium next to this year's. If yours does, that comparison is the most useful number on the page. If the figure has climbed and nothing about your risk has changed, treat it as a prompt rather than a bill. Our guides to comparing car insurance and energy plans walk through what to actually compare.

🎯 The essential: The practical move is to behave like a new customer once a year. Not because switching is always right, but because finding out what a new customer would be offered costs you nothing, and not finding out has a price.

🏦 Superannuation inertia and stapling🔗

Super is where this does its most expensive work, because the sums are large and the horizon is long.

Most people are defaulted into their employer's fund, and into that fund's MySuper option, and never revisit either. Since 1 November 2021 the stapling rule means your existing fund follows you to a new job unless you actively choose otherwise. Your employer asks the ATO for your stapled fund if you do not nominate one.

Stapling is genuinely good. It stopped the old pattern of collecting a new account, and a new set of fees, at every job. But it also means the fund you were defaulted into at twenty-two is now considerably more permanent than it used to be.

The Super Guarantee is 12% of your qualifying earnings, arriving every payday for your whole working life. Over thirty or forty years, small differences in fees and returns compound into large differences in the final balance.

Staying put is fine if your option has low fees, sound long-run performance and a risk setting that suits your age. Plenty of default MySuper options are perfectly competitive. It is worth a look if you have never checked the fees, if you are in your twenties or thirties sitting in something conservative, or if you still have old accounts open somewhere. Our guide to comparing super funds covers what actually matters.

⏱️ The admin cost illusion🔗

Ask why someone has not switched energy plans and you will hear that it is a hassle. Ask how long they think it takes and they will say hours.

It very rarely does. Comparing plans on the regulator's free site is a matter of minutes, and the incoming retailer does most of the rest. Changing an investment option inside your super fund is usually a few clicks in the member portal. Refinancing is more involved, but a broker carries most of it.

We reliably overestimate the effort of changing and underestimate the cost of staying. That asymmetry is the bias doing its job: it inflates the imagined hassle until staying feels justified.

📋 The yearly review that beats it🔗

You do not need to reorganise your finances continuously. You need one structured session, once a year, asking the same questions in the same order.

1. List every recurring payment. Insurance, energy, internet, mobile, streaming, gym, mortgage. Making the invisible visible is most of the work.
2. Read your insurance renewal properly. If last year's premium is shown, compare it. Then get two competing quotes before you renew anything.
3. Compare your energy plan on Energy Made Easy, the regulator's free service. If you have not moved or renegotiated in two years, you are probably not on the best rate available.
4. Check your mortgage rate against what your own lender advertises to new customers. If there is a gap, ask them to match it. That call is free.
5. Log into your super. Check the fund, the option, the fees and the balance, and consolidate any old accounts, after checking what insurance cover you might lose by closing them.
6. Review your mobile and internet. These move fast, and a good deal from two years ago is usually a mediocre one now.
7. Book next year's review before you close the laptop. Same week, next year.

💸 What staying put tends to cost🔗

❓ Frequently asked questions🔗