Over 1,000 people attended the recent ASFA Conference in Brisbane, with good conversations in the sessions and around the Super Expo.
David Orford and Peter Rowe were kept busy talking to delegates visiting the Optimum Pensions booth to learn more about Everlasting Retirement Income—and see our ‘yellow-suited man’ spruiking the ‘sweetest plan for retirement’.
Retirement income strategies: from strategy to implementation
There were a few sessions that looked at the challenge of helping members prepre for retirement. Nick Callil, WTW, led a panel discussion with Ben Hillier, AMP, Jacki Ellis, Aware Super, and Dr Geoff Warren, ANU, on the lessons learned in developing retirement income strategies and how funds are addressing the challenges of moving from strategy to implementation.
The panel all agreed that members want to have the confidence to spend in retirement. Ben said, “the number one fear retirees have is running out of money”. Jacki added that “guidance is not enough without confidence”, as well as highlighting the need to consider non-financial aspects of the transition to retirement.
The number one fear retirees have is running out of money.
Ben Hillier, General Manager Retirement Solutions at AMP
Uncertainty and change results in anxiety. Individual circumstances and preferences significantly affect how a member approaches retirement. Superannuation funds are all collecting more data and undertaking qualitative research to know more about their members. They are using this information to create cohorts of similar members and provide guidance in a more personalised manner. Jeff went as far as saying that a cohort of one might be desirable but acknowledge the system challenges to achieve this.
One of the key contributors to this uncertainty is how long a member expects to live in retirement. Ben pointed out that while average life expectancy is commonly used by superannuation funds, financial advisors and retirees as a target for retirement planning, it is a “terrible measure”. He introduced the term “reasonable lifespan as the 80% confidence age or the age at which only one in five is going to outlive that point.”
Affordable and accessible advice
Superannuation funds often refer to the financial advice regime as a barrier to better help their members into retirement. Nick said that WTW’s review of superannuation funds’ retirement income strategies found that many of them talked about improving the general guidance they make available to retirees and boosting their financial advice functions.
In her keynote address, Michelle Levy, Chair of the Treasury Quality of Advice Review, said that she recommends expanding the services superannuation funds currently provide to members. This is a pivotal time for the industry, with 3.6 million Australians expected to retire in the next decade.
She said that “it is not feasible or desirable to separate the sale of a financial product from the issue of the financial product” and has proposed introducing a two-tiered model: more expensive professional advice from accredited financial advisers and less costly advice from financial services providers.
“A relationship between a superannuation fund and a member might be one of the longest relationships a person has. It makes no sense to say the fund should not be providing advice to their member from time to time and in doing so, they should give advice that is relevant to the member,” Michelle told the audience.
Peter Chun, CEO of UniSuper, was part of a panel discussing Michelle’s recommendations. He said that Trustees could not meet the requirements of the Retirement Income Covenant without more advice. He told the audience that “members want to engage digitally, and it’s a huge opportunity for funds to do more in that space.” Peter also referred to the need to give members a more personalised experience. “When we think about personalisation, the gold standard is Netflix, and I joke with my team internally that we want to be the Netflix in retirement.”
Solving the retirement problem
If the DC retirement problem is going to be solved anywhere, it’s [in Australia].
Ashby Monk, Executive and Research Director, Stanford Global Projects Centre
Giving hope to our current predicament, Ashby Monk, Stanford University observed that Australia is the most interesting place in the world for retirement at the moment. He said “If the DC retirement problem is going to be solved anywhere, it’s here.”