A focus on product innovation is proving fruitful for industry fund HESTA Superannuation, which last year introduced HESTA Income Stream, a default strategy that de-risks over time.
“One of the things we’ve really identified is that members are looking for a strong default option in the income-stream space,” says Debby Blakey, deputy chief executive at HESTA. “And I think funds did a very good job of the default investment option on the accumulation side, but I don’t think much thought had gone into the default strategy in the income-stream side.”
Blakey says most funds have historically had only a balanced option as the default option in both. HESTA, which has $20 billion of assets under management and is the largest industry super fund for health and community service workers, made the de-risk product the default for members who don’t make a selection when moving into income stream.
“What we found amazing was the number of members who are actively selecting the strategy,” says Blakey, adding that it’s not only growing fast, but that they were “blown away” by December quarter numbers.
“We’re thinking about what that means for us. I don’t think members want to have to continually revisit their investment strategy, and I think in the traditional income-stream models, where they might put some of their money in cash and have some in growth, they have to continually revisit and rebalance that.”
Blakey says the option gives members capacity to make choices with flexibility on exposures, knowing that exposure to growth assets like shares will decline over time.
Given its success, Blakey says the fund is considering risk groups among its more than 750,000-member base – their personal attitude to risk – going forward.
“We’re looking at how we deliver advice and the models we use for the different risk profile groups, and we’re modelling them in a very similar way,” she says.
The fund wants to provide investment models that cater both the aggressive and risk averse members, which will de-risk over time.
Blakey will be speaking at the Post-Retirement Conference, a Conexus Financial event in association with AIST on March 5, 2013 in Melbourne. For further information, click here.
|Opposition LICS talk|
|Blakey says HESTA Superannuation is disappointed in the opposition’s recent talk of abolishing the Low Income Earners’ Contribution Scheme (LICS) if it gets elected.“HESTA’s demographic absolutely would be impacted by change to LICS,” she says.HESTA’s primary demographic is women, who make up 85 per cent of the fund’s membership base, many of whom are low-income earners.
“If you look at those low-income earners who are going to be impacted by the legislation… a significant number of them are female members, so that was not only going to address the low-income issue, but also gender inequality in super balances.”
Blakey says it’s important for people in the public policy debate to advocate for lower income earners.
“Let’s be real about it. High-income earners and high-account balance members often have more voice. Members in the lower income space, they often aren’t out there advocating for their own super benefits.”
Blakey says HESTA will get involved in addressing the debate through ISN and AIST, but the fund generally doesn’t have direct involvement.
“Although I must say if we have any personal contact, or if we have opportunities to speak, we do put these issues on the table.”