Accessing reliable data on members’ financial situations and retirement goals is possibly the biggest problem facing superannuation funds, Challenger chair of retirement income Jeremy Cooper has said.
Cooper, who chaired the Cooper Review – a comprehensive look at Australia’s superannuation system during 2009 and 2010 – said accessing the comprehensive data stores of Centrelink, the Australian Taxation Office and Australia’s largest banks could enable super funds to better help the swelling number of retiring Australians planning for their futures.
Speaking at the 2018 Investment Magazine Post Retirement Conference held in Sydney on March 20, Cooper said there were some “very large funds” in Australia whose knowledge of their members was limited to their balance, street address and name.
“From that position, being able to offer a 21st-century retirement solution, [is a challenge],” Cooper told a panel chaired by UniSuper head of product Ian Lorimer.
Many superannuation organisations are accumulating wealth for their members in default funds, he said, where there isn’t much need to know more about the consumer.
“And, of course, when you’ve got hundreds of thousands of members, or in some cases millions, that just adds to the enormity of the problem,” he said.
There were two “massive and quite confronting solutions” to this problem, he said. One is to enable access to Centrelink’s store of information on the assets and income positions of about 70 per cent of Australians who are over 65; this data is gathered from the SA002 form used to apply for the age pension.
Another possibility is access to the information the ATO holds. Both of these solutions have inherent problems, Cooper said – and not just privacy issues. There is also the challenge of organising the data into a form the superannuation industry can use. Most people accumulate superannuation individually through employment, then spend it down jointly in retirement as part of a couple. So funds need data on the entire household.
A third solution could come from the federal government’s Review into Open Banking in Australia, which could lead to the information banks accumulate about their customers being made available for those customers to pass on to others, said Nick White, Mercer global director of portfolio construction research.
“If we work on the principle that most members trust their super fund more than they trust their bank…maybe that creates opportunities for super funds to enter that space,” White said.
Cooper said superannuation funds needed to consider data important from a governance perspective. They need to make data “part of the culture of whatever organisation you’re in – to really value that data and value the single source of truth of it – and to make sure that data is really regarded as important, because that’s where your customer edge comes from”.
The self-managed superannuation industry had mostly solved the data problem, he said, by knowing the retirement goals and income situations of its retirees. This was the “gold standard” to which the rest of the industry should aspire, Cooper said.