The super fund industry is feeling heat from many quarters – the public, media, regulators and the government – around member service metrics such as advice, retirement products, claims response times, on top of investment returns.
Minister for Financial Services Stephen Jones challenged the industry to lift their game last year. The additional scrutiny comes as five million Australians are expected to retire in the next 10 years amid an increasingly competitive landscape for members.
“Funds are tackling what’s arguably the hardest problem in finance, which is stretching someone’s money to last as long as they do,” HostPlus group executive – member experience Paul Watson tells Investment Magazine.
With 1.7 million members and $98 billion of funds under management, HostPlus is very mindful of this huge responsibility to educate members make the best retirement choices they can.
“The ultimate member experience is what super does someone have when they get to their retirement and how that will generate a retirement income. That is our number one mission and our number one KPI,” he says.
The industry is waiting for the first stage review by ASIC and APRA regarding how super funds have implemented the retirement income covenant. The regulators are expected to publicly release their findings shortly and will be welcomed by the industry says Watson.
“I am very keen to get the regulator’s view on what they see as good practice or things they would counsel or guide funds to think more about in their strategies and may be things that are less important to them,” he says.
An industry veteran, Watson has been at HostPlus for 12 years. He was previously CEO of Military Super and prior to that, deputy CEO of MTAA, now Spirit Super. In addition to member services, he is responsible for product development, retirement, advice and client relationships.
HostPlus’s covenant execution
HostPlus has a phased Retirement Income Covenant strategy underpinned by a wholistic mix of engagement, education and product. The fund is moving into what Watson calls “phase two” of the initial strategy.
The fund recently launched a partnership with Iress and Industry Funds Services to provide personalised digital advice for members.
On top of the SuperSmart Iress/IFS digital advice platform, HostPlus will be launching a comprehensive curriculum on a broad suite of financial literacy topics, self-education tools through multiple channels such as video and other digital medium.
HostPlus will also kick off sending members on reaching 55 years a “wake up” pack as they approach retirement to give them practical information about a projection as to what their likely income in retirement will be based on their balance and individual investment options. Watson’s plan is to progressively send these statements every couple of years as the member moves into retirement.
“This is guidance that helps people feel more confident and understand matters so that they feel confident about seeking advice.”
The fund has also restructured its advice delivery model and set up what it terms as “advice support officers” says Watson. “[It is] almost like in a medical analogy of being the triage. They speak to members to best understand what level of advice they might need at a certain point in time.”
The Retirement Income Covenant has driven product innovation in the industry with investment-linked lifetime products the latest in market.
These include Challenger, Generation Life, AMP with TAL and Allianz with Retire+ that went live in March.
HostPlus’s own retirement product CPI Plus sits alongside its other investment options. Launched around 14 months ago to its retiree members, there are plans to go more broadly, says Watson.
It currently offers 2 per cent over inflation and the yield is reviewed annually as part of the asset allocation and product review process.
He believes the next phase of product will involve deferred annuities so that members will have a stream of retirement income that will never run out in their lifetime.
“This is what drives us in terms of member experience in product innovation. [Australia is] an international leader in mandated superannuation but we’ve got to be equally as thoughtful and world leading in the next phase of retirement,” he says.