Allens’ partner Michelle Levy is not due to finalize her review of quality government advice until mid-December, but that can’t come soon enough for the pensions industry as she seeks to match needs pension plan members with solutions.
The retirement income commitment is the issue that many industry players are focusing on as it assesses exactly how to meet members’ needs, which depends in part on any regulatory changes that may arise from Levy’s report. Simplicity is hope.
Councils are considered one of the best ways to gather data on members’ finances, but from there it’s a torturous path as funds roam the minefield between personal and general councils.
This is a key part of the retirement equation, and as the industry grapples with this fact, it also presents a competitive test for the industry, with the right products being a game-changer for industry. A more committed member will know the alternatives offered elsewhere.
Teifi Whatley, of the Australian Retirement Trust (ART), spoke on behalf of many: “We believe that quality review of advice and commitment to retirement income must come together in a given time”. This way the industry knows how far it can go.
“At Australian Retirement Trust, we truly believe in the power of financial advice and the power it has to materially change people’s lives. We know that financial advice directly improves members’ financial literacy and well-being and leads to better retirement outcomes,” she added.
It is estimated that $1.5 trillion in assets are held by people over the age of 50 in Australia and the whole idea of the super is to provide retirement income, so the question is at the heart of the industry, or at least should be.
CFS Super’s Kelly Power said Investment Magazine “We are currently updating our analysis of member needs across different segments (including age, gender, accumulation and retirement phases, account balance, product usage) as part of our ongoing efforts to better understand our members, their needs and opportunities to improve our products or services.
“Thanks to the investment of $430 million that we will make over the next four years, we will update our offer of products and services. This includes adding new investment solutions, additional digital services and increasing education, and improving our longevity product offering.
It shows the money the retail sector is investing in this challenge.
The key is early engagement with super by members
Financial advice is considered the best way to gather information, but that assumes people want financial advice and the fact is most don’t.
Duncan Macpherson of Link noted that “the biggest challenge is that a third of people don’t want comprehensive financial advice, either because they’re not ready for it or the costs are too high”.
The good news is that according to Frontier Research, 50% of members seek help from their fund and there is a level of trust between the two.
ANU’s Geoff Warren notes that 59.4% of accumulation assets are default products and that these assets are the key to whether the person with the $300,000 balance also owns 500 million BHP shares and four investment properties.
David Carruthers of Frontier said Investment Magazine, the trick is to provide the best service within the counseling guidelines.
Necessary flexibility between access to capital and income stability
Regarding the main choices of investment products, ART’s Whatley agreed on the need for flexibility, noting that other trade-offs retirees may have to consider include the need for flexibility in accessing capital and income stability.
Whatley said: “Retirement has traditionally been viewed as permanent, beginning at the end of continuous full-time employment. Today, however, the work and retirement patterns of Australians reaching retirement age and entering their super are often much more dynamic.
“Members’ pension balances can restrict their choices between flexibility and control on the one hand, and security, pooling and risk management, stability and predictability on the other,” Whatley said.
“The need for higher income levels earlier in retirement can often be a trade-off for income longevity depending on pension balance and other investments.
“Members face competing needs in retirement, and decisions about investments and income, as well as unexpected costs in retirement, can be overwhelming for many of our members.”
Sarah Foreman from Aware Super said Investment Magazine, “Our members tell us that they can often feel overwhelmed by the complexity of the retirement income system and that it is difficult to apply general information to their personal situation.
“Our research shows that a significant proportion of our members are lacking income in retirement focusing on minimum withdrawal, so for members entering the retirement transition phase of life, we encourage them to consider the support and information they’ll need from their super fund – whether that’s accessing free online tools, calculators and webinars or contacting our Member Service Center for general advice at no cost additional information, in order to answer their main questions and concerns.
Although personalized advice may be the best way to find information, it is not the only way.
Essential digital options for many members
Data collection using website calculators and other digital options is used with seminars and other member meetings
SCF uses internal data and conducts extensive research with members to better understand how they plan and prepare for retirement and the role we can play in meeting their needs. “Retirement planning is complex and that’s why, in addition to providing better guidance and education for members, we are strong advocates for quality financial advice. This is also why it is imperative that the review of the quality of advice responds to the declining availability and affordability of financial advice,” said CFS.
Insignia said, “Superfunds can help members assess their financial and non-financial needs through education (e.g. online content, webinars and podcasts), use of tools and calculators, and directing members to other sources of information such as Money Smart, ATO and ASIC. Centrelink websites.
The trick is to maximize the increased engagement as members get older, their balances increase, and they are more willing to share information as they see the end use.
Duncan Macpherson of Link said a well-trained contact center can be a boon. “People call the contact center for all sorts of reasons and a little nudge in the right direction tells you what members are looking for,” he said.
Nick Callil of WTW noted that the process is still in its infancy and that better technology improves quality. Funds need to ensure their information is both useful and understandable to help members assess risk levels, he said. The industry is in a state of flux on these issues and it remains to be seen where it lands.
Pensions a complex area
Link is working with Jeremy Duffield at SuperEd to see what approach he can take to put together a white paper on pensions.
SuperED was established ten years ago by Duffield and Hugh Morrow to help super funds help their members achieve better retirement outcomes by educating, coaching and advising members on the path to retirement.
The starting point was to digitize old-age pension applications so people would know if they were eligible for the pension on a form, and then help them through the complicated application process.