With around 20 per cent of its assets in the retirement stage, the $23 billion Team Super – created by the merger between Mine Super and TWUSUPER  – is thinking harder about how it can take its members from working life into their golden years. But it doesn’t think that product alone can do the heavy lifting, according to CIO Seamus Collins.

“It’s still quite frustrating to me that a lot of the narrative in the industry is around delivering product,” Collins tells Investment Magazine.

“Our industry is just way too product focused. And that’s natural and understandable because that’s where the commercial interface is and where the sales engagement happens.

“But we have to get away from that and start thinking about the member interface, because this is the moment for industry funds. We’re really peerless in a paternalistic default environment – demonstrably, in default, it’s a better model. I think it’s hard to dispute that.”

Ahead of Investment Magazine’s Fiduciary Investors Symposium in Healesville, Victoria, on 21 to 23 October, where he will appear on a panel session discussing the portfolio implications of decumulation, Collins says default-led funds are “challenged” to gather the information that can be used to inform member choice as they enter retirement or head towards it. And that does raise the question of whether funds need to be able to offer some form of ‘soft default’.

“But that is still contentious, and in the [current legislative and regulatory environment] there is still no way you can really pursue that,” he says. “The process of delivering product and delivering retirement to members that are outside an adviser relationship.”

“I like that idea [of a soft default] and would like the industry to engage with it. Yes, a form of ‘MyPension’, but we’re still some way away from that and I don’t step back from the challenges that would entail. The fundamental function of a default at the moment, the great advantage of an accumulation default, is that the moment a member gets engaged they can look at their default and change all of it.”

Collins made the comments in an interview prior to an announcement by Australian Retirement Trust (ART) that it would lobby the government to pursue reforms to allow them to offer a “suggested product” – an opt-in soft default.

“There are millions of Australians around the country that aren’t taking up an income stream in retirement, and that’s a squandered economic opportunity for the country because it’s just tied up in savings – it’s just sitting there in an accumulation environment,”  Anne Fuchs, ART executive general manager for advocacy and impact, told Investment Magazine in early August.

Trustee bravery
Building upon the account-based pensions super funds already offer, many funds are now looking to longevity products – alone or in combination with their existing product line-up – to meet their members’ retirement income needs.

But while Team Super has had conversations with longevity product providers about how one might look integrated into its other offerings, and knows that there is likely a cohort of members for whom that would be an ideal retirement income solution, actually putting it together is challenging – as is distributing it.

“Distributing those structures through a digital-only channel would require a level of trustee bravery that I don’t think is justified in the current environment, or it would at least be difficult,” Collins said.

“We certainly offer them through our approved product lists through our advice channel, and a number of our advisers are really well versed in these products and the value they add.”

Collins believes that some combination of the Age Pension, an account-based pension and a longevity product is suitable for members of the missing middle – the group of members that isn’t served by an adviser or able to fall back wholly on the Age Pension, and which he is most concerned about.

“I think the solutions being put forward of ‘well, everyone just needs to get an adviser’ – that’s not realistic,” he says. “But the challenges for trustees putting people into solutions and products through a digital mechanism still present a level of risk. These are challenges that, as a fund with a relatively small member base which we’re pretty close to, we hope we might be better positioned to solve than some of the more broad-based peers.”

“But as a broad-based solution, notwithstanding the [Retirement Income] Covenant, there’s still a fair gap for super funds with broad-based membership that are not in advice circumstances. There’s still challenges in bringing those solutions into an overarching retirement strategy. It’s the challenge we’ve got to solve for – we just have to find a way.”

Investments is only one part of solving that challenge. The frontline is really member engagement, research, support and advice delivery, and Collins is “full of admiration” for those who are working hard on retirement.

“And I do feel that there’s just a lot of the public narrative of ‘you’re not trying hard enough’ that doesn’t always recognise the very real challenges of the broad-based accumulation default system,” he says.

“From my perspective, people are spending a lot of time thinking on how to solve this.”