Super needs customised, personalised approach: FSC

The Financial Services Council (FSC) says superannuation funds have the power to provide a sophisticated and personalised approach to meet members' retirement needs and must prioritise this amid the government applying pressure via the Retirement Income Covenant and the proposed Best Practice Principles for retirement.

The FSC in conjunction with NMG Consulting yesterday released Empowered for retirement, a best practice guide showing trustees how they need to evolve to better serve their members. This is not just in retirement but throughout members' entire journey with their fund across product design, engagement and service offerings.

The framework lays out what strategies trustees should adopt to provide tailored engagement with members based on their life stage.

For members aged 16 to 34 years old, for example, the framework suggests engagement via superannuation and retirement literacy. Trustees can engage with those aged 35 to 49 by looking at their evolving personal circumstance and provide guidance on understanding savings and contributions behaviour and product selection.

NMG Consulting partner Lachlan Reardon told the FSC panel discussing the paper that retirement is a service and not a product proposition.

"We have had the products we need to solve for retirement for a very long time. They are an important part of the puzzle, but they are only part of the puzzle. We need to have a service infrastructure and an engagement infrastructure to support members through and into retirement," he said.

Reardon noted this is where the major gap exists in the system. The first reason why it exists is because the industry grapples in the post-Royal Commission regulatory environment that poses significant barriers to how trustees want to service and support and engage members.

"The second thing is that we are still not structurally set up to serve or engage members in the way that we need to solve for retirement, in the way that we're going to have to," he said.

"That is in part driven by post Royal-Commission risk appetites and the regulatory environment we're in. It is also driven by the fact that this has been an accumulation system since its inception in the main, so we haven't stared into the retirement challenges that we are about to face."

The report stated that by 2033, Australia will have about 3.6 million retirees holding one quarter of the super system's assets. A further 6.3 million Australian's will be approaching retirement with almost half the system's assets.

FSC chief executive Blake Briggs said super funds should engage from the day a member gets their first superannuation contribution through to retirement.

"We know retirement is not a one size fits all journey for Australian consumers. Every superannuation member has their own goals, their own needs and circumstances, and this requires tailored support and solutions, a cookie cutter approach to retirement simply cannot meet the diverse needs of all Australians approaching their retirement," he said.

"Members need to be empowered to make investment decisions, to make informed choices that are aligned with their personal goals, rather than encouraged by regulation, to remain disengaged and subsequently shoehorned into default retirement products."