The superannuation industry is gearing up to help members shift to retirement with mass education campaigns and new products ahead of the results of a joint APRA and ASIC review of funds’ retirement strategies.

APRA and ASIC will release the results of its first review of the industry’s strategies in mid-2023 which will serve as a guide on just how interventionist it plans to be. The industry is hoping for some feedback and guidance from the regulator even to the extent that Fund “X” provided a good strategy and Fund “Z” was not so good.

WTW’s Nick Callil said the Retirement Income Covenant last year was “a high-level document, now the funds have to actually develop a strategy”.

Equipsuper’s head of retirement Sam Higgie tells Investment Magazine the retirement focus takes the industry back to its fundamentals as “helping people in retirement is the whole purpose of superannuation” but member reaction to the retirement covenant has so far been muted though he expects that to change. He says the process of releasing retirement strategies last year was useful but for competitive reasons some funds did not release their full strategies.

Higgie says Equip first attempted to put people into cohorts but then realised people were looking for more individual advice. This was also the thinking at AMP said Ben Hillier, general manager – retirement solutions. He said the cohort strategy was flawed as two people might have $500,000 in the account but one also owned a million BHP shares and five properties so clearly their needs were different.

Higgie is one of several new appointments in the industry to the role as head of retirement. With over 900,000 members over the age of 50 years, AustralianSuper appointed Shawn Blackmore as its first chief officer retirement late last year. The fund has 150,000 members who are in retirement accounts. Other notable appointments include Jacki Ellis’s internal promotion to head of retirement at Aware Super, along with Young Tan’s move from UniSuper to Aware Super and Jon Sedawie’s move from Cbus to AustralianSuper.

Advice vs education

Education is a big part of the transition to retirement and funds have been deploying a variety of communication tools to improve member knowledge.

Equip found members were looking more for guidance than full blown advice. Surveys revealed around one third of members did not want any advice, one third looked for guidance and one third wanted everything done for them. “The process from here was all about engagement, education and assistance, with product development not at the front of the to do list,” said Equip’s Higgie.

Timely information could help members save thousands of dollars according to Andrew Boal, partner at Deloitte. He said some funds had members who were past retirement age with money sitting in their accumulation account seemingly unaware of the tax advantages of swapping into a retirement account.

Australian Retirement Trust − the merged QSuper and Sun Super − strategy chief Teifi Whatley said the fund uses annual statements to help guide members on their progress and how much their account would provide in income payments when they retire.

“We use seminars, webinars and the website as much as possible to guide members,” she said.

Hostplus plans to deliver “Wake Up“ packages to members to try to get them to engage more closely with the fund to improve their lifestyle in retirement.

“Australians have the reputation for being the wealthiest people in the graveyard and we want to help members make the most of their retirement,” head of member experience Paul Watson said.

The fund will write to its over 50 year-old members, updating on performance including an individual calculation of how much they can expect to have when they retire based on present contributions.

This will also serve to help overcome the problem of working people beyond the retirement age not taking advantage of retirement accounts for tax purposes said Watson.

The government’s response to the Quality of Advice Review is likely to impact the superannuation industry and the delivery of financial advice and superannuation products.

One of the controversial recommendations includes lowering the barriers to getting advice by replacing the “best interest duty” with “fit for purpose“, suggesting some client knowledge.

Aware Super who has invested heavily in financial advice with 80 planners on staff, welcomed the proposed changes.

“We think the concept of lower barriers is excellent and welcome support for more financial advice,” Steve Travis, group executive, member growth tells Investment Magazine.

“We have found members trust their superannuation fund and want to get advice and help in retirement. They expect us to give advice.” Travis says the fund was also working on more retirement products aimed at “income efficiency”.

The fund has 1.2 million members of which 100,000 or roughly 10 per cent will retire in the next four years.

Like several other funds, Aware is working with Jeremy Duffield at SuperEd to help members access pension and other levels of support including online pension applications and online retirement planning. “We are trying to reduce the pain points,” he says.

ART’s Whatley said she was supportive of any change to make advice more affordable. One of the key roles for the fund was to reduce complexity for members in dealing with other agencies like Centrelink she said.

ART has only a small inhouse team of advisers although call centre staff are trained to give general advice and the fund works closely with external advisers referring members who seek advice to the right people.

Hostplus is also aiming to boost the number of advisers available to assist members through closer ties to external advisers. It now has 15 fully fledged financial advisers on its books and 10 call centre staff who are trained to assist in superannuation matters.

ART’s Whatley said the challenges ahead included scaling advice to make it available to as many members who want it and also reduce complexity.

Competitive advantage

More retirement products are expected to come to market over the next few years and funds with better products and services are seen to have a competitive advantage in attracting new members in the latter years.

In 2021, some 55 per cent of all retirees had less than $250,000; in 2031, over half will have more than $500,000 in their accounts.

ART’s legacy QSuper and Sun Super both offered bonuses to members switching to retirement packages. The fund was also first in market with a new life-time pension product, which helped inform the recently-released much expanded AMP product, both designed by AMP’s Hillier.

ART’s Whatley said she was “pleased to see more products on the market to encourage more people to move from accumulation to retirement packages”.

Hostplus is aiming to release more new products later in 2023, adding to its successful CPI-plus product released in 2022.

“Retirees want both total flexibility and certainty which is the conundrum, so the products will be aimed at guaranteed income,” said Watson.

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