Challenger’s Aaron Minney likens member engagement with superannuation to being a passenger on an aeroplane. Being engaged with the process is a good thing, but knowing every little detail and being aware of every issue is burdensome and likely to undermine confidence.

For members of super funds that confidence is a crucial ingredient in helping overcome a fear of running out of funds, Minney believes.

“It’s not simply more money that makes people comfortable,” Minney said during Challenger’s Solving the retirement puzzle at scale webinar recently.

The head of retirement income research at Challenger brought up a recent report the provider released in tandem with the National Seniors Association that found wealth was no guarantee of a comfortable lifestyle in retirement.

“It comes back to confidence; if you’re not confident about your retirement you’re not going to be comfortable,” Minney said.

Addressing the issues that plague superannuation in this country will take in-depth actuarial analysis, he says, but that doesn’t mean clients need to be bombarded with this convoluted analysis. Instead, the industry needs to find some cohesion and present wrapped solutions to members.

Like passengers on a plane, the journey is more pleasant with being frightened by complexity. “We’ve got to stop scaring in that sense,” he said.

Complexity needs to stay “under the bonnet”, he added, before using a common consumer product as an analogy. “Take your iphone,” he said. “It’s a complex piece of technology, but it’s so simple the average two-year old can take it up and use it. There’s complexity behind it but it can simple for the client.”

Simple and scaled solutions are required, Minney argued, and they need to come soon.

“There are more than a million member accounts that have retired post the FSI (Financial Services Inquiry) and we haven’t put that solution in place yet,” he added.

Minney was joined on the panel by Amara Haqqani from actuary Milliman and Rice Warner chief executive Andrew Boal. The session was hosted by Mercer senior partner David Knox.

Haqqani said there is currently a “divergence” in the super industry between those that have some inertia and are waiting for legislative reform before they create better solutions for members, and those that are hunting solutions now.

Getting the kind of data funds need to enhance their retirement solutions isn’t easy, Haqqani said, but funds can get a head start on the data science and analytics by taking advantage of data alternatives while they collect their own information.

“One of the things we’ve really embraced with some of the funds is that it doesn’t have to be perfect, you can proxy some of this stuff,” she explained. “You start with something that’s an intelligible proxy, for instance home ownership status; there’s really reliable data from the ABS by age that you can use to tell if someone is a home owner. And you do that simultaneously to building out your data solution within the fund, with the conscious effort to collect that data moving forward that you’re currently proxying.”

Getting engagement with members at the right time is also critical, Rice Warner’s Boal said. That timing needs to be closer to when members find themselves in a default fud than when they near retirement, he believes.

“As Amara was saying we need to collect data to help make these decisions about defaulting someone into something,” Boal said.

More broadly, the CEO ventured, the superannuation industry requires three things to move forward with building better retirement outcomes; complexity, consensus and cohesion.

The lack of cohesion on issues like the agreed purpose for superannuation and comprehensive income products for retirement (CIPRs), in particular, needs addressing, he said. “That does seem to be a common theme.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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