Making retirement better for Australians 

We asked each system whether they show projections of a member’s future benefit in their annual statements. It’s not something we require in Australia. But 16 systems around the world have it as a requirement, not just as an option.

We think Australia is missing something here. We’re failing to help members focus on their future income, instead prioritising the accumulation of their super balance during their working life.

We asked each country if they mandated how members take the retirement benefit, specifically whether retirees must have an income stream. In 25 of the 44 systems, there’s an obligation to take an income stream…but Australia isn’t one of those.

And in 10 of the systems, they go even further and prevent any of the benefit from being taken as a lump sum. Everything must be used to purchase an annuity.

For those with no rules about the retirement benefit, there’s at least generally an incentive to take an income stream. For example, in Australia, we make this tax free. 

Members must have confidence in their super fund and believe it’s acting in their best interest

Create a genuine two-way relationship, not just the super fund trying to engage with its members.

Innovation is more than products and solutions. It should extend to how funds engage with members before and through retirement. We must innovate our thinking to make retirement an integral part of the super fund’s business strategy and turn it into a competitive advantage.

Age pensions can change throughout someone’s retirement years, as a means test can be applied, and assets or income can change. So, to produce a retirement solution that works at every point in time is near impossible. 

Unfortunately, we can’t change this. But we can help members navigate through the complexity. And to do this, we must develop ongoing communication channels with members, because things can, and do, change during retirement, and they need to know where to find help when they need it. 

Continued efforts to assist members in the pre-retirement phase:

• Help members understand the retirement system.
• Explain what retirement might look like based on members individual needs. 
• Educate on a range of options available and how the age pension may affect their entitlements.
• And, continue to help members through retirement.

We must build the right touchpoints for members so they can easily access relevant information when they need it. That’s what will help build the trust, and what will enable members to confidently spend their money in retirement rather than worrying it’s going to run out. 

The super guaranteed payment also successfully builds trust and engagement through the accumulation phase. There’s a perception among most members that “my super fund is looking after my money and it’s all done through a default system so I don’t need to think about it”. 

But when someone reaches retirement, a decision is needed. There’s limited information available, so we must step in and create a framework to provide guidance and help members confidently make that transition into retirement.

This is slightly different to the other challenges in that it’s not a problem we’ve created. But it’s certainly one we can’t control. We’re on average living longer, but the data also shows we’re living longer in poor health1. This leads to concerns over aged care support and healthcare costs. 

A super fund can’t solve every problem a retiree faces. But funds can position themselves as a trusted source of information and guidance. Funds can help members find out where to go for help when it’s something that falls outside their remit. By establishing key relationships and partnerships with other businesses within the retirement ecosystem, funds can collaborate to develop solutions that make a difference.

Since the introduction of SPS 515 in 2020, trustees have enhanced their business planning practices. But APRA wants trustees to move beyond a compliance-focused approach and integrate member outcome considerations across all aspects of their business operations. There’s much work still to do here.

From July 2022, all APRA-regulated super funds must have a documented strategy to identify the retirement income needs of their members, along with a plan to service those needs. It typically includes the following:

• A retirement income strategy for all their members, including the possibility of different strategies for different cohorts of members.
• Consideration of the Age Pension and its implications for members.
• Ways to help members maximise their retirement income, manage the risks that may affect their income during retirement and consider flexible access needs.
• A framework to conduct regular reviews of members’ retirement income strategies.

In responding to the Quality of Advice review, the Government announced it wants to make it easier for super funds to provide advice to the millions of members approaching retirement. Its view of an effective retirement system sees Australians using their super to improve their quality of life in older age. 

We call this a “dignified retirement”. 

However, current regulations prevent super funds from having the personal conversations needed to help members develop those successful retirement income strategies. This now looks like it will change.