The ‘raison d'être’ of super: A path to decumulation

At the 2024 Australian Council of Superannuation Investors (ACSI) conference held last week, industry executives agreed on the imperative for super funds to be service providers, not just money managers.

According to Aware Super chair Sam Mostyn, funds have to be “really honest” about their success as accumulators, for better or for worse.

“We have been brilliant investors, we have been very concerned over that accumulation phase over the last 30 years,” Mostyn said.

But what has “snuck up” on the industry, she explained, is the 5 million people in Australia who are soon to retire and those who are going to be thinking about retiring much earlier than the retirement age.

“We have got to be the best at standing beside our members for their retirement whenever they ask us to help them. That is a complete switch in the skill set sitting in our sector,” Mostyn said.

Claiming that this is the biggest challenge to Australia’s $3.7 trillion super industry, Mostyn said the funds that seek to prioritise service “want to be in a contest for this for the best possible reasons,” noting “that is our job now, to stand by people as they go into retirement”.

AustralianSuper chief Paul Schroder agreed that “there’s a few things we are not good enough yet at”.

The one that keeps him “awake at night”, he noted, is the efficiency of making member payments, such as paying death claims promptly. Interestingly, according to data from AFCA, AustralianSuper is one of the most complained against funds when it comes to things like death benefits.

“In the investment cycle we’ve been really good, but actually most of the complaints I get are about retirement,” Schroder explained.

“That’s the worst time in the organisation’s life to get something wrong, and I feel really quite sick about that.

“The thing that makes me feel really uncomfortable is that it’s the members’ money, they want their money, and we need to be able to make sure they can get it really quickly, smoothly and directly.”

While acknowledging that fund concerns around the security of handling payments, such as ensuring funds reach the right person, should remain high priority, Schroder said funds have a tendency to spend more time thinking about the “complications”.

However, HESTA chief investment officer Sonya Sawtell-Rickson posited that pension funds have been thinking about the decumulation phase “for a long time in some ways”.

“We’ve always known that our entire ‘raison d'être’ is to provide retirement income for our members,” Sawtell-Rickson said.

“What’s becoming exciting is that the scale is starting to change, and so the scale of numbers that are coming through, both in terms of members and capital, is really starting to make new options and new innovations possible and plausible.

“I think what most funds are looking at now is what does it look like today, both in terms of scale but also in terms of technology and how much that’s advancing. What could it look like into the future? So I’m really excited about where the retirement journey will go for members over the next decade.”