At the heart of many of the submissions and recommendations made to the Treasury’s consultation on the retirement phase of superannuation is funds’ gathering, sharing, analysis and use of member data.
A key point made across the 91 submissions released by the Treasury is that while accumulation is a largely homogenous process, retirement is different: it must be tailored to members’ individual needs, and if funds do not understand much better what those needs are they’re largely in the dark when it comes to designing and delivering solutions.
Everything else – including product and service design, along with nudges; information, guidance and advice; removing friction in decision-making and transacting; and a range of other issues addressed in the submissions – is squarely predicated on access to deeper and more accurate data on members’ current situation, and understanding what their likely future needs are and how they can be met.
Treasury opened consultation on the retirement phase of super in December last year, in recognition of the fact that “there is still a long way to go” in super funds’ development of effective retirement solutions for members.
“Superannuation funds need to do more to understand their members’ retirement needs, set a vision for their members’ retirement outcomes, and provide well-rounded retirement products,” it said.
“There is a role for government and regulators in creating an environment that supports these changes.”
Treasury said its consultation paper built on work the government had already done, primarily through its Delivering Better Financial Outcomes package of reforms to financial advice, to expand the provision of retirement advice by super funds.
The consultation paper applied “a specific lens on the superannuation retirement phase, extending beyond the provision of financial advice to cover broader themes”, Treasury said.
“This paper also takes a holistic approach to ensure a complete understanding of the issues at play and the connections between them to inform better solutions,” it said.
How much data is enough?
Collecting member data has long been an issue for super funds, beyond the basic information members are required to give when opening an account. Some actively and regularly survey members to help fill perceived data gaps; but others do not, and some have used lack of data as a possibly convenient excuse for not having pushed further, faster, with retirement solutions development.
In addition to organic data issues, funds also face challenges in accessing and sharing data on members held in other places, most notably government agencies such as Centrelink and the Australian Taxation Office.
Treasury’s consultation paper notes that “data is a critical input for funds to provide better retirement income strategies”, and it sought input on the processes and procedures funds have in place today for collecting analysing and applying data to developing solutions.
It also sought input on what barriers there are to better data practices, and ideas on what policy approaches could help funds use data more effectively.
Regulators are already onto this issue: a joint ASIC and APRA report on the progress of funds in meeting Retirement Income Covenant obligations noted that funds should “address fundamental data and analytical gaps to enhance their understanding of members to support effective strategy formulation and deliver useful assistance to members”.
Access to extensive, clean data is not a panacea; there remains plenty of scope, even having the data they need, for funds to still fail to develop effective retirement solutions. But it’s also true that no solution can truly be said to member-centric if it’s not designed with a clear understanding of what members actually need.
Part of the data issue is how funds themselves gather and analyse member data, but another significant aspect is how data already held in different places can be more effectively accessed and shared, subject to appropriate safeguards.
In its submission, Cbus Super noted the current system offers funds “very limited insights into individual members’ circumstances beyond what their super account balance is”.
“For example, it is unlikely superannuation funds will have data on household circumstances and investments outside of super,” it said.
“It is noted that Government agencies including Centrelink and the ATO collect and hold a significant amount of information directly relevant to members’ employment, income and retirement. Members would benefit from the introduction of a simple, efficient way to share their data with their fund.”
Cbus said this could help funds deliver better guidance to members, help them to pre-populate forms and to “support members to achieve a better understanding of their financial position before and in retirement”.
Sharing is caring
HESTA recommended to the Treasury consultation that a data sharing framework is needed to enable funds to better meet the Retirement Income Covenant objectives.
“The output would be a single access point of data from various agencies such as APRA, ASIC, ATO and the Department of Social Services,” it said.
“Such a data sharing framework using a single point of access would provide a single and efficient query point, rather than funds seeking data from multiple sources.”
Elsewhere in its submission, HESTA highlights the importance of data in supporting consumer choice and empowerment. The fund notes the Organisation for Economic Co-operation and Development’s (OECD’s) ‘High-Level Principles on Consumer Financial Protection’ framework provides that “consumers should be able to search, compare, share data and, where appropriate, switch between products and providers easily and at reasonable and disclosed costs, for instance by leveraging interoperable systems”.
AustralianSuper noted that developing a wider and deeper understanding of a member’s individual financial situation would allow funds to support them better in retirement. It said “empowering members to give their superannuation fund secure access to relevant data held by government, and allowing members to identify themselves to superannuation funds through a government accredited digital identity, would help to deliver improved outcomes”.
The fund noted that key member data is currently held primarily by Centrelink and the ATO and “enabling members to choose to provide this data to their fund would address multiple pain points currently present in the transition to retirement caused by the lack of a single source of truth”.
Australian Retirement Trust likewise supported better data sharing, saying in its submission that “better data sharing between the Government and superannuation industry could result in system-wide administrative efficiencies and better retirement outcomes for individual fund members”.
“The sharing of a member’s data by the ATO can assist funds in providing nudges, guidance, education and advice,” ART said.
Better transition
And Aware Super included in its list of no fewer than 37 recommendations that the government should “allow for innovation in the development of retirement solutions, including use of data and personalised nudges, before considering automatic defaults for highly disengaged members”.
It argued that raising members’ engagement with superannuation and retirement requires the right policy settings, including to ensure that “data flows to make engagement easy and helpful for members, rather than creating additional friction”, and to support “the ability to nudge and recommend tailored products to members based on limited information”.
Aware noted that its own data has revealed that “even with a smooth and straight forward” online joining process for members to start a pension, it can take a total of around 18 hours to open an account.
“The ability to combine advice and data capabilities to personalise soft default product recommendations will allow funds to offer a much simpler and more seamless approach, particularly for existing members,” it said.
Rest recommended that further consultation be undertaken to examine data-sharing opportunities.
It noted in its submission that funds currently face challenges in gaining access to “sufficient relevant and accurate information” to help guide and support members to make better decisions”.
It said its own insights into member behaviour suggest that “retirement is a flexible transition”, and members rarely just fully retire on a given day. Rather, they often move “out of and back into the workforce, or [undertake a] gradual reduction in hours, and ongoing work in retirement”.
“This makes it challenging for funds to identify when members require greater information or support, and when they can be seen to be ‘retired’,” Rest said.
“In addition, the data required to effectively provide guidance is frequently related to household circumstances, and access to data for a household can be limited, often even for the individual to access.”
Retail super fund Colonial First State recommended consideration of a model for data sharing between government and the superannuation sector to “determine how employment, retirement income, age pension, superannuation cap, consumer data right and other information could be integrated, under a consent-based model”.
“We support stronger data integration between government and industry to show members their income and age pension in the one place,” it said.
“We also support working with government to develop key policies to enable this kind of information being provided to members.”
