An industry fund vision for retirement comfort

A $9.2 billion industry fund is using behavioural economics to fight the Federal Government's inaction on increasing the superannuation guarantee.

Vision Super has trialled a program called 'Save more for later' to help employees of Mount Alexander Shire Council save more for retirement; a move the industry fund felt it needed to make to ensure its members didn't miss out on a comfortable retirement as a result of delays on increasing the SG.

The program is based on the concept of 'hyperbolic discounting' which suggests people place less value on their future self than they do their current self - meaning that while they may be unwilling to save extra for retirement now, they are willing to do so in the future.

Vision Super chief executive Stephen Rowe said the program had been several years in the making, having first presented supporting research and modelling to the Australian Services Union in 2014, suggesting they include the program in their staff enterprise agreements.

"Our research suggested that if you ask people to save more now, they are likely to say no, even when you give them all the information about why they need to save more to have a comfortable retirement," Rowe said.

"People need the money now to pay bills and put food on the table, or they'd rather have the money to spend now. But if you ask them to save money they don't have yet - for example from a future pay rise - they're very likely to agree."

Under the program, rather than being afforded a regular pay rise, employees have part of their increase in their pay packet and part as an additional contribution to super which accumulates over the typical three-year life of an enterprise agreement. Staff are automatically included in the program but can opt out.

Mount Alexander Shire Council was the first to have an enterprise agreement that included the program approved by Fair Work Australia in October.

"We knew this would help our employees to save more for their retirements. And we knew it was a positive step for financial wellbeing, which can have a big impact on workplace morale and productivity. But I don't think any of us realised how much it was going to increase engagement," Mount Alexander Shire chief executive Darran Fuzzard said.

He added that more than 70% of employees have remained in the program.

The program is expected to be rolled out more widely, with Vision Super negotiating with several other organisations to have it included in their enterprise agreements.

Read more: Vision SuperFederal GovernmentMount Alexander Shire CouncilsuperannuationAustralian Services UnionDarran FuzzardFair Work Australiafinancial adviceretirement incomeStephen Rowe
Link to something AEtQMYzh