To paraphrase Winston Churchill, where there are great pools of money there is great responsibility. This has always been the case, you only have to look at the debates in the House of Lords in the 18th century about the activities of Clive and the East India Company to see that those who control large pools of capital attract heightened scrutiny and are held to a high standard of behaviour. It is these heightened expectations that present one of the greatest challenges to superannuation funds.
Heightened expectations lead to heightened challenges
Meeting modern expectations is as much about moral standards as it is about service delivery and financial performance. But the first challenge for trustees, and not entirely in their control, is the trustee model itself, a moral context imposed by the Government’s original decision to adopt a trustee or fiduciary model for superannuation. For example, what is meant by ‘members’ best interests’ is capable of many interpretations and, I believe, has contributed to the heightened expectations for super trustees and fund performance.
While it is impossible for trustees to act in the best interests of individual members, this seems to be where expectations are heading and managing that shift will be a significant challenge for trustees. One thing we do know is that simply stating that ‘we act in members’ best interests’ is not enough, it has to be backed up by tangible evidence.
The next challenge outside trustees’ control is the fact that people view large pools of money as a panacea or antidote for any crisis or pressure point – bushfires, aged and health care, climate change, you name it. We all know that using superannuation for purposes other than retirement would greatly undermine the success of the system but we will need to convince others of this as future crises emerge, especially as the pool of funds grows larger.
This is not to say that superannuation should play no part in nation-building or in addressing the great policy challenges of our time which are food security, energy security, liveable cities, health and aged care and the carbon puzzle. Super should be involved in all of these, as well as any opportunities the fourth industrial revolution presents, but not out of sentiment and virtue signalling but because they offer good investments. Many of the 6-star NABERS office buildings you see in our cities were built and are owned by super funds, not because they are a community service but because the carbon puzzle has produced investment opportunities that are good for the environment and produce solid returns.
Removing the fog of unreasonable expectations
So, what can be done to remove the fog of counterfactuals and unreasonable expectations?
First trustees need to look afresh at their target operating models or how they deliver services to members. The trustee model has evolved over time and I doubt that many would have chosen their current mix between insourced and outsourced services. As part of this review trustees also need to look at the opportunities offered by innovation and technology. The aim must be seamless and flawless execution in service delivery and it is only investment in technology that will support this through things like increased automation, enhanced use of data and predictive algorithms (although I acknowledge how hard it is to look ahead when you are doing all you can to keep up with Protecting Your Super and Putting Members’ Interests First system changes).
As an industry, we need to understand exactly what Australians are doing in retirement, what their aspirations are, what happiness trade-offs occur and how life in retirement changes over time rather than arguing over whether a 50 per cent or 70 per cent income replacement rate for the median Australian is what individual Australians need. The Retirement Income Review has highlighted that we still do not have a fact base for the ‘lived experience’ of Australians in retirement. To build this fact base, a proper anthropological and longitudinal study should be undertaken with a significant sample of Australian retirees. I don’t want to pre-empt the study’s conclusions, but I think one finding will be that, contrary to the assertions of the anti-retirement brigade, life doesn’t end at age 75.
While not one of the issues that is currently contributing to a lack of trust in superannuation, we must also take seriously the threats to our cybersecurity. Our system has many points of vulnerability and we must look ahead to secure ourselves against attack.
Telling the superannuation story well
We live in anxious times and anxiety is not a good foundation for sensible policy-making. But we must remember that 2020 is not the first age of anxiety and will undoubtedly not be the last. We can look back in history for many obvious examples of anxious times, such as the 1930s in Europe or the Cold War. History also provides us with examples of people worrying about change for no reason, such as the Victorians’ obsession with the impact of noise on the mental alertness of their young students, a strange neurotic outgrowth of the industrial revolution.
Superannuation cannot be the antidote to the anxieties of our times, but it can contribute to their amelioration as long as the boundaries of that contribution are clearly defined. We need to tell our story better – how our basic purpose is to support Australians in the extraordinary variety of their lived retirement experiences, how there are ancillary benefits such as providing investment capital for markets related to the carbon puzzle, how we can contribute to making our cities more liveable and improve vital services such as aged care.
A story well told won’t dispel all misconceptions or silence the anti-retirement brigade, but it is a good start.
