It’s no secret that the superannuation system isn’t really set up to facilitate the transition to the lifestage that members have been saving for over the course of their working lives. In accumulation, if you don’t make a decision, one is made for you. But when they get to retirement, a lot of members don’t even know that they have to do something to start getting their money – let alone what they should do with it when they do get it.
“Members are coming to us with simple questions and looking for answers,” Giacomo Tarantolo, UniSuper manager of retirement solutions, tells Retirement Magazine. “But often those simple questions have complex answers.”
Some of those questions include: how long will my money last? What are my options? Who can I go to for help? On that last one, UniSuper is hoping they’ll go to one of its financial advisers; it has an internal team of 165 of them across the nation, who last year racked up 60,000 meetings last year with 40,000 members, providing general, intrafund and comprehensive advice. It’s in the process of developing a hybrid digital advice model that will replicate some features of the intrafund advice experience but expand to retirement and “super health checks”.
“The idea is that if it can be done within super, relates to super and can be collectively charged, that’s what we want to do,” Tarantolo says.
“And then we can triage them into comprehensive financial advice, whether it’s internal or facilitating an external financial adviser for those situations where it’s more assets outside of super – those more complicated topics. We don’t want everybody to go there because they can’t; there’s not enough to supply to meet that demand. Our role as a super fund is to complement the financial advice system, not to compete with it, and really focus on the missing middle.”
The missing middle, to UniSuper, is defined by lack; high net worth members are getting all their questions answered through comprehensive advice, while members with no to low balance are being supported by the Aged Pension and there’s “not much they can do”.
“But that missing middle – those members with between $100,000 and $400,000 – they’re the ones that would benefit the most from getting financial advice, but they don’t have the willingness or propensity to pay for it,” Tarantolo says.
“And even if they wanted it, it’s really hard to get a meeting with an adviser. There’s only 16,000, and we estimate only 9,000 of them are client-facing when we have 3.6 million retiring over the next 10 years.”
“It’s about how we service them, and that’s why we’re developing our digital advice functionality but making sure that it’s a hybrid approach.”
At a time when many super funds are trying to remove points of friction in members’ transition to retirement – and put them in one-size-fits-most products once they’re there – Tarantolo says UniSuper wants to introduce more choice into a complicated process and that “the best default is active decision-making”. That’s because there’s so much information that a fund can’t know about their member, such as the assets of their spouse, or their assets outside super.
“They could have money with other super funds, assets outside of super, they worry about their health, their partner’s health, do they own a home, are they eligible for the Aged Pension?” Tarantolo says.
“There’s so many other facets that go into that equation and it’s why comprehensive advice costs four, five grand. It’s not a simple question with a simple answer.
“I think we can do more on helping them know how to start. I think the problem is when you say ‘Okay, you’re over 65, you haven’t contributed in over a year, we’re going to push you straight into a retirement product’. Maybe they should consider a retirement product, and here are the ones we offer, but they need to consider all the other options and what’s right for [them].”
Fear of running out
Tarantolo says that solving for the Retirement Income Covenant means offering a lifetime income product, which UniSuper already does and which it believes is currently meeting the needs if members. But the fund is currently reviewing the “viability, suitability and sustainability” of that option, which isn’t guaranteed by a life insurer but is instead backed by the fund’s legacy defined benefit asset pool, and which has been in place for the past 25 years. But when it comes to adding to the product suite, Tarantolo would want to see “a lot more members using it” before he commits to anything.
“I would like to see something I can hang my hat on, that screams success, before we use members’ money to build something that 100 members use. People spend a lot of money and don’t get a lot of sales.”
To be successful in the longevity space, the “narrative” around product needs to change, Tarantolo says. Longevity products shouldn’t be compared to an account-based pension or a MySuper default, but to insurance – insurance against living too long. Tarantolo believes that, as a hypothetical, members in the accumulation stage would still opt to pay for life insurance even if they were shown how large their balance would be in retirement without it.
“They don’t compare their balance to one without life insurance; they just want the sense of security,” Tarantolo says.
“It’s the exact same thing in retirement… you could get six per cent from an annuity for the rest of your life, or you could just buy Telstra shares and get six per cent dividends and keep your capital. It’s the wrong narrative but that’s how people are viewing it at the moment.”
Because UniSuper already has a product in the market that’s meeting member needs, Tarantolo reckons it can take its time to find something new that will work harder for members – if it does want to change. But product is, as ever, only half the picture. Member experience and behaviour is just as important for ensuring they get a good retirement outcome.
“The product is like the engine of the car. You’ve got five per cent of people, the revheads, who’ll buy the car for the V12 engine,” he says.
“But most people buy the car for the heated seats, the wireless charging, and – if you ask my wife – the cupholders. It’s the experience of driving the car, and they expect the engine to work – that when they hit the accelerator, it goes, and when they hit the brake it brakes.”
