The superannuation industry has been roundly criticised by regulators ASIC and APRA for not moving more swiftly to meet its obligations under the Retirement Income Covenant.
But despite the regulatory lambasting, and the fact that some funds are moving faster than others – at least in part because catering to a retiring cohort of members is not an equally pressing issue for them all – considerable work has been going on behind the scenes.
Solutions are emerging that address product structures, digital advice, and service models, all informed by a philosophy of delivering retirement solutions based on clarity and simplicity and familiarising members with the issues they’ll face at retirement, including income streams as an objective.
Insignia Financial director of customer innovation Ashton Jones told a Retirement Magazine roundtable that part of the aim is to help educate members on what to expect when they do retire and how they might use their super for a better retirement.
Jones told the roundtable, held in collaboration with T. Rowe Price, that an innovation it will incorporate into its superannuation offering later this year is an example of how funds are starting to meet members’ retirement needs by addressing behavioural finance issues in addition to the more widely understood investment needs.
“The activity in the industry around this opportunity has increased significantly over the last couple of years, in terms of people actively working to deliver lifetime income in different ways, shapes and forms,” Jones said.
“One of the things that I’ve observed is when customers have a retirement option embedded in something that is familiar to them, they’re much more likely to engage with it.”
“A lot of how [retirement] comes together ultimately for the consumer is going to rely upon advice, and is also going to rely upon it being within something that’s familiar to them.
“And a lot of these [lifetime income] solutions are not familiar to consumers today.”
Michael Davis, a former deputy assistant secretary for the Employee Benefits Security Administration at the US Department of Labor, and now T. Rowe Price global head of retirement, told the roundtable that a sense of familiarity is crucial when it comes to helping members navigate the complexity, risk and uncertainties of retirement.
“The one most important input that people need from a retirement income perspective is, ‘How long am I going to live?’. They don’t know that. Nobody knows that,” Davis said. “And partially because of that, the question of how much they’re going to need in retirement is the most complicated question in finance.”
Davis said a hybrid path providing guidance and advice from both digital and human sources is increasingly typical in the US, and the roundtable heard that superannuation providers in Australia are finding success with digital models.
AMP director of growth and customer solutions Julie Slapp said that just three months after launching digital advice, take-up by members had far exceeded the fund’s expectations. Slapp said more than 1300 members accessed the digital advice service and 550 members completed a retirement Health health check within the first three weeks. Current take-up is already double the volume of the fund’s intra-fund phone-based advice across the 2024 calendar year.
Slapp said that encouragingly, take-up has been strongest among women.
“We’re seeing a trend of females actually looking at this kind of advice, so, a lot of people accessing digital advice on weekends and getting more engaged,” she said.
Slapp said AMP plans to expand digital advice further in coming months. And while only 10 per cent of users currently follow up with a human adviser to discuss their advice, so “it’s not a one size fits all in terms of their actual implementation”, it’s an encouraging start.
Davis noted that “retirement is a team sport”, requiring a whole-of-industry response. Policymakers have an important role to play but “they have to solve it in concert and in communion with those that have to deliver.”
“In this case, it is supers, it’s advisers, intermediaries, and all of those entities have to work together in concert to solve this really complex problem that we have,” he said.
Full coverage of the Retirement Magazine/T.Rowe Price Crossroads for Global Retirement Policy roundtable will appear in an upcoming edition of Retirement Magazine.
