It’s both a puzzle and a source of frustration to many in the superannuation industry that the average Australian has so little interest in their superannuation.
We all recognise that retirement is a long way off for most people and that many households are more concerned with paying next month’s mortgage than reading about the benefits of compounding investment returns. Yet it remains an enigma how something with the potential to become one of the most, if not the most, significant financial asset in so many people’s lives can be so poorly understood and even mistrusted.
Recent AIST-commissioned research into Australian attitudes to super – the results of which were released at our March Conference of Major Superannuation Funds – highlighted many of the myths and misconceptions that surround retirement and super. The survey suggested that a disturbing number of Australians knew little or nothing about their super and nearly three quarters of respondents were worried that they wouldn’t have enough super to retire. Few read the reports sent to them from their super fund and there was widespread uncertainty about whether the rules of super would again be changed. One third of respondents said they didn’t feel that super was really their own money.
Such comments sit uncomfortably with some super funds who have worked hard at engaging their members through creative marketing campaigns, educational programs and workplace visits. The message is being heard, but perhaps not as loudly, or clearly, as many of us would like to think. Paradoxically, media interest in super has arguably never been greater. In the past few months, AIST has fielded media enquiries on a diverse range of issues – from climate change and short-selling through to questions on early-release super, the role of the representative trustee system and our concerns about the structure of the Government’s proposed first home buyers saving scheme.
Lately, of course, the media’s focus has centred squarely on the turmoil in global financial markets. Suddenly, even the hosts of afternoon radio chat shows want to know about super and the extent to which the sharemarket fallout will impact on fund returns. Many in the super industry are no doubt concerned that headlines such as “Super funds to record the worst performance in 20 years” and “Carnage to wipe out super fund gains” will make the challenge of selling super to the Australian public even tougher.
Reflecting on the sharemarket performance over the past few years, it’s clear that super funds have had a golden run. But the news isn’t all bad. There’s some indication that the recent sharemarket volatility is drawing people’s attention to their super and may lead to more people making extra contributions.
A Newspoll telephone survey conducted by AIST following January’s sharemarket correction suggests as many as three in four Australians would support a lifting in compulsory super to 12 per cent by 2012, if that increase was partly funded by the Government and partly funded by themselves.
More recently a Commonwealth Bank survey found that the increased sharemarket volatility had prompted many baby boomers into changing the way they would plan for their retirement. More than 77 per cent of respondents said they intended to make additional voluntary contributions to their super.
Most super funds have already begun the process of educating their members about return expectations this year. Like AIST, the message they are spreading is that while funds returns will be lower this year, the average super fund is still up by about 70 per cent over the past five years. As unpleasant as the recent sharemarket fall may be, medium to long-term super fund investors are sitting on healthy gains while new investors – for whom retirement is still a long way off – have plenty of time on their side to ride out sharemarket volatility.
Tough economic conditions also mean that simple, personalised and helpful advice for members becomes even more important. The Government’s plan for a short form of product disclosure statement is certainly a welcome and long overdue initiative. Each fund member should be able to understand at least the general features of the how the system works and the particular features of their own fund.
We are living in volatile times. But if the past tells us anything about the future, the market will recover, super fund balances will continue to grow and, in doing so, further the public’s interest.