The digital age is transforming superannuation and the level of engagement expected by clients. ING DIRECT’s Anne Myers suggests that those who fail to recognise this risk paying a price.
The Australian superannuation system is the envy of the world. From the compulsory superannuation guarantee beginnings in 1992 to now, we have more than $1.3 trillion invested. That makes the Australian superannuation market the fourth largest pension market in the world – employing thousands
Yet something is not quite right.
Twenty years of guaranteed billions pouring into super funds has led to complacency and stifled innovation.
Recent OECD figures indicate that Australia’s superannuation funds have lost a greater share of their members’ funds since the GFC than any other advanced pension system in the world, with the exception of Iceland.
ING Direct’s own research has found 76 per cent of Australian households don’t know how their superannuation funds are allocated and only one quarter of households are confident that their superannuation fund will deliver enough for them to retire comfortably.
And the University of NSW’s “Retirement incomes for the dazed and confused” survey has found that despite 20 years of compulsory superannuation, people aged over 50 years have a surprisingly poor grasp of which investment choices ensure the best retirement income.
Dr Hazel Bateman, director of the University of NSW Centre for Pensions and Superannuation, said that people were basically clueless about the features of retirement products.
So what has led to this and what can be done to improve our superannuation system so that all Australians understand it, and it provides better returns for our retirement?
A good starting point is for superannuation funds to better engage with their members. This means actually asking their members’ what they want and then delivering it.
Jeremy Cooper’s Stronger Super report clearly summarised the key issues with our superannuation system:
- member interests’ are not always paramount;
- it’s too complex;
- the fees are too high;
- information and understanding of investment options is limited; and
- there is a lack of transparency and comparability of super products. No wonder people are not engaged.
Superannuation must be one of the least accessible and poorly communicated products in the market. Yes, we receive reams of information from our super funds, but does it make sense?
Is this information relevant and accessible on all digital devices and through all communication channels?
Where is the customer experience? Where are the digital tools?
There is some movement towards better communication and online access, but this change is glacial. Super funds need to embrace the digital age. They need to provide information 24/7.
It’s not just Gen X & Y that are online-obsessed. Baby boomers and even the depression-era generation are now active online participants.
The recent ‘Older Australians and the Internet’ study found that more than 63 per cent of over-50s were now purchasing goods online. Telstra’s 2011 ‘Retired and Wired’ report found that the over-65s were online at least once a week and 12 per cent were regular social media users.
Internet use is now across all demographics. Yet the majority of superannuation funds are marginal participants in the online and digital revolution.
Super funds that don’t adapt to this revolution will be replaced be new and more nimble entrants.
Currently, there is a huge disconnect between customers and their super funds. This is also evidenced through the growth in self-managed super funds in recent years.
It’s this disconnect and complacency that is ripe for a new entrant to the superannuation market.
The focus should be to ensure the customer experience is the foremost consideration.
These new entrants will be online, accessible 24/7 across multiple digital platforms, provide member support and investment education tools, be simple to understand, be responsive, offer a wide range of investment options including lifestyle and life-stage investing options, provide ready snapshots of performance, and evolve through your life stages.
The current “ignorance is bliss” approach of our super funds won’t cut it in the digital age.
A customer-centric approach leading to a better-informed superannuation member with full online access is the future of this industry.
Anne Myers is chief operating officer at ING DIRECT.
