How to best engage members is a challenge the super industry has been trying to crack for years. From its inception, the system was designed with employers in mind, and with the expectation that for most of their working life, members would not be actively involved with their super. As a result, it was not funds’ initial priority to interact closely with members. To this day, it remains difficult to overcome what funds refer to as ‘future discounting’, or the reality that most of us focus on spending and saving decisions which impact us now, rather than retirement outcomes many years into the future.
At the same time, in addition to the desire to offer good service to members, advances in technology are spawning a plethora of low-cost banking and investment services, and so the strength and success of the system requires that members engage with and see value from their fund.
Following are some of the questions and responses, organised in a few recurring themes.
How did you end up with your current super fund?
Everyone Superfunds spoke to knew where their super is now, but a number hadn’t actively chosen the fund they are currently with. These people had been in their fund from their first job, either because it was the default fund, or it was chosen for them by their parents.
Most of those who were with their initial default fund had seen no real reason to change, but a couple had changed after poor performance and high fees saw their balance decrease. As younger members left university and started to work and earn money, their focus on performance increased exponentially. For these members, it was common to switch funds once they had self-identified a fund with a track record of strong performance. As well as performance, fees were a major factor in the decision to change, particularly when performance was struggling. Lower fees matter more for the younger members who have smaller balances which are more affected by higher fees. However, all members wanted to see something for the fees.
Most people Superfunds spoke to said they had a pretty good idea of how their super was invested. Generally, young people said they had elected high growth options on the basis that they would be saving for a long time. Older people said they had elected for a balanced fund, with an emphasis on income. When asked whether they knew what kinds of investments were included in their high growth portfolio, most were not able to say what they were invested in.
Ease of access counts for a lot
“I am interested how my fund is performing and how this affects my balance, but it is such a hassle to log in to my super account that I just don’t bother. You need a member number, then some other identification number and then a password and it’s all just too hard.” Bella, 22, student
No one said they wanted to engage daily with their super, but they did say they wanted to be able to check their balance, look at performance figures and compare year-on-year returns and fees easily. A couple of the younger members said they would be prepared to change fund (or had changed) on this basis alone.
A few members (older and younger) said that difficulty logging in was frustrating and caused them to give up on trying to access their super or look at their balance.
Older members—either close to or in retirement—all said that they “pay attention to their super now” in a way they didn’t in the past. They are acutely aware of market ructions caused by COVID-19 and the impact these have had on their balance.
I didn’t need to, but I see no problem with accessing my super early
Younger members said they did not access their super, not because they were concerned about the long-term effect on their balance, but because they didn’t need to, and often didn’t have enough in super to make accessing it worthwhile.
Some said they would have if they had enough super, not to use the money to pay for living expenses, but because they believed they could do better things with the money than their super fund – they quoted adding to their savings outside of super, or contributing to a deposit to buy their first house. This suggests that there is room for further education from funds on the impact of early access, as well as information for members who do need to draw down on their funds.
Older members already living on their super saw no reason to withdraw additional funds, even those affected by the reduction in the minimum drawdown requirement. They all saw the benefit of leaving as much money in the super system as possible.
Super funds communicate, but not in a way which resonates
“I would really appreciate a call from my fund, particularly when I make a big change to my portfolio, like when I switched from 100 per cent cash to a mix of equities and property. No one even contacted me. I feel like they couldn’t care less, in their mind they are getting big management fees regardless of what happens in the markets or what I do, and they don’t care.” Brent, 51, tradesman
When participants were asked whether their fund has written to them about COVID-19, for example, to outline the fund’s response or to explain the effect on their super balance, most said “they probably have, but I don’t read the emails they send.” Interestingly, a couple of young members—used to receiving communication by email—said they would be more likely to read a letter rather than an email, because they expect that communication which arrives by mail is more important than communication which arrives by email. Some members said they read the first line of emails from their super, but unless they can see immediately that it is important for them, they disregard it.
Most said they would really like a short email or newsletter which explains performance (in addition to the detailed reports they receive annually) but that this form of communication doesn’t seem to come to them – whether the fund doesn’t send communications, or members don’t open them was not elaborated. The longer-form performance explanations can seem overwhelming – members would like something which cuts to the chase and is more accessible. Those members which don’t work in financial services or business were particularly interested in receiving communication which explains in simple terms how super works, how financial markets and investments work so they can understand, and therefore pay more attention to their super.
Older participants saw the lack of communication from their super fund as a serious negative. At the same time, fees were a real focus, particularly if the member’s investment was 100 per cent in cash, and the fees seemed very high for what the member saw as the fund “doing nothing”. They said they would really appreciate it if their super fund ‘reached out’ to help them understand their options, or at the very least talk through what the options are.
What about crisis communication – did your super fund communicate the effect of COVID-19?
“At a time of crisis, when markets are changing every day and my balance is so affected, I would like regular updates, every week in fact – I’ve been happy with performance generally over the years, but the last thing I want is for the fund to go quiet when times are tough. Even if they have bad news to give me, I’d rather have the news.” Phil, 65, retired
Most members said they though the fund had been in touch regarding its COVID-19 response, but no one said that the communication was helpful or comforting. Sometimes this was because they didn’t read it. Those who had read the fund communication said their super fund did not do a good job of explaining what was going on. A few said they got their information from the newspapers and had the distinct impression that their super fund wasn’t on the front foot in their response.
Some older members affected by the Government changes to super wan
ted a lot more information. This was particularly true for those affected by the temporary decrease in the minimum drawdown requirements for account-based pensions and transition to retirement income accounts. One member said that his fund made the change on his behalf (in line with the Government legislation) without telling him or explaining to him what they were doing. He understood that the fund had to comply with government regulations but wanted the effect on his account explained.
Advice in super
“My faith in the capability of financial advisers generally is low. It seems like it’s easier to qualify as a financial adviser than as just about anything else, their standards aren’t high, and what was revealed at the Royal Commission reinforced my view. Still, I do think that the Royal Commission and its recommendations will have a positive effect on standards going forward.” Will, 22, commerce graduate
Most members we spoke to knew they could access financial advice through their super fund, but none had taken this up. While not representative of all members, among the group there was an overwhelming lack of confidence in financial advisers generally, and a sense that an adviser would not be beneficial or have more knowledge than the member him/herself.
Scams and security of data and information
No one said they had specific concerns related to cyber security around their superannuation fund, or their banking details in general. All were aware of various scams in the market but felt confident that their super funds had security in hand and that their data and information was well protected. A few, across all age groups, said they never thought about it at all.
Life insurance
“I am young so hadn’t really thought about needed life insurance, but at the same time, post Royal Commission my feeling was that most life insurance is half-dodgy. I do think though that the recommendations of the Royal Commission, and the fact that it called out bad behaviour, will improve standards in the industry.” Will, 22, commerce graduate
“The first time I knew I had insurance as part of my superannuation fund was when I received a letter telling me they had cancelled it because my balance was too low. Before that I had no idea I had, or was paying for, insurance.” Bella, 22, student
When asked about their insurance, young people overwhelmingly said they did not believe they needed life insurance, nor had they given it any thought. The only time these members mentioned thinking about their need for life insurance was for a few who said they had specifically asked for the life insurance not to be included in their super.
One older member said he felt angry that he had been paying for life insurance for years and didn’t understand that he was. He believes that the fact that life insurance is included in super as a default should be better explained and pointed out to members.
I’m not sure that my super, alone, will be enough to retire on
“What I don’t like to see is people who have saved for their retirement disadvantaged compared to those who haven’t.” Phil, 65, retired
“I work for a financial advice firm, and many of our clients rely on the monthly payment from their super fund as well as Centrelink to survive. The gap between the balances of men and women is something which really needs attention, as some of the widows we have as clients have much less to live on than men, particularly those who never thought they would need to fund their own retirement.” Bella, 22, student
Most young members said they didn’t expect to live on their super balance in retirement, but rather that their super would be a nice additional pool of money. They all hoped and believed that they would be able to make and save enough outside of super to have a better retirement than they believe super alone would provide. Some pointed out the differences between the balances of women and men, and the negative effect this has on women in retirement.
Older members said they saw the Age Pension as a ‘leg up’ or like the dole, for people who have no super, but not a realistic amount to live on. At the same time, while fans of the system generally, there were comments to the effect that some people appear to be better off on the pension because they get reductions in rates and other benefits, whereas the retiree who is fully self-funded receives no benefits.
Conclusion
Super funds and their members have been through very challenging times recently – and while the small pool of members we spoke to were generally positive about the way their funds handled the crisis, it was clear that they would have liked their funds to communicate more quickly and transparently during the pandemic. They didn’t like getting information about the pandemic and its effect on markets from the media rather than from their fund.
In previous articles, we have spoken to funds about the leaps forward they made in technology and culture during the pandemic, and technology revealed itself as a major differentiator in the group of members we spoke to for this article. It was clear that across all age groups, a well-designed app was highly valued – one which offered easy access to information both about their individual fund and balance, as well as about major market events, like COVID-19, and the likely impact on their fund.
For super funds, member communication processes should be a priority, including testing engagement by asking members what they value and how they want information delivered. This is particularly true for members impacted by COVID-19.
