So we’re looking at revising our retirement products on the basis of trying to engage these disengaged members,” he says. “We’re looking at providing that disengaged membership with a very simple, but low rate-of-return product, and driving communications to them. [We might] make it a default, but have a slight opt in, opt out tweak to it. They will have to provide us with information that will make them qualify for the product, otherwise they will go back to the default. “We’ve looked at annuities and other products, and they’re expensive. Rather than put members into the expensive products, you’re better off charging these costs to an in house advice service – which also enables us to engage members, or at least look at tailoring these products to their individual needs. “One of the problems, especially in the industry fund sector, is the lack of information about members. We have to start building it up to give us some flexibility.” Craig Turnbull, CIO, Local Government Super (LGS), says the fund’s investigation of lifecycle strategies resulted in the development of six different investment strategies, plus an age based default, to provide a natural progression for members as they accumulate and then retire.

Members’ money is fairly evenly distributed among those different strategies, so LGS is not just focused on a dominant default option. “The perceived need,” Turnbull says, “was that people were looking for more reliable income and their experience in the GFC was: ‘Hey, I’ve elected for a conservative strategy, I didn’t realise I could lose so much money with a conservative strategy – but I still want to have some risk’. So some sort of protection product is on the drawing board, and it’s a question of what’s the best solution for our members? “It wasn’t that we were looking to protect all members’ equity exposures, but was more for the members who were really riskaverse and didn’t want to lose their income and capital. “It has to be a member’s choice – and easy to understand – so complicated strategies go out straight away. It has to be low-cost because no one wants to pay a lot for this protection, and it has to be administered, which can be costly if multiple strategies are being run at the same time.” The Commonwealth Bank OSF’s Parlevliet likes the concept of insurance, but the problem is the regulatory environment requires guarantee providers to have so much capital that it becomes very expensive. “We need some other way to have a similar concept with less expense, which means the member gets a better result,” he says.