There are fewer super funds, and associations that represent them, than ever before. But multiple layers of industry representation working at cross-purposes means that true unity has remained elusive, according to the Financial Services Council.
The world’s largest sovereign wealth fund just made its largest return ever. But the probability of extreme market events has “arguably risen”, and it’s carrying out stress tests for a more uncertain future.
Funds urged on new ‘CRIO’ role and better engagement
Perhaps it’s time for big super funds to elevate their retirement solutions staff with the appointment of a ‘chief retirement income officer’ to complement the role of chief investment officer, according to a report produced jointly by KPMG and Challenger.
Funds have been working on the problematic retirement incomes issue for years now, well aware of their aging membership base and the encroachment of more-flexible SMSFs as baby boomers get closer to retirement. But, it has to be said, they haven’t made a lot of progress.
The KPMG/Challenger report, ‘Guiding Members Safely Down a Path in Retirement’, says: “The messaging around super adequacy needs to be refocussed on engaging with members around the role of their super and therefore their super fund through their retirement. A fearful member is more likely to seek help from an external adviser.
“Living off your super in retirement needs to be positioned as a solution and not a problem. One issue for funds is that it is sometimes unclear where the responsibility lies for delivering retirement income for members. In the effort to build up savings for members in the accumulation phase, investments and asset allocation are the go-to solutions. It follows that the CIO has been a central figure in delivering solutions. Retirement is different though.
“The return of member money is not the same as the return on money. Ultimately, it is about the benefit to members, but the responsibility can get lost in the cracks between, Product, Member Engagement and Investments. A new role, the Chief Retirement Income Officer (CRIO) could expedite implementation by taking charge of this important function in the one place.
“Equipping this new CRIO with the right tools (internal and/or external) could provide tangible value to members, leading to better retention through retirement. Even thinking about the need for a CRIO could be useful in considering how best to manage the retirement income challenge.”
There are lots of hurdles for super funds to negotiate in developing a suite of retirement products, including taxation, about which they can’t do much, and the high cost of embedded insurance, about which they can only do a little – perhaps by forming their own co-operatives to build the necessary scale to push down costs.
The KPMG/Challenger report says that funds have a pressing need to develop solutions that integrate engagement, advice and product to meet members’ needs as they navigate through their whole life.
“For funds that successfully achieve this, the result will be successful outcomes for retiring members and better engagement with members throughout their membership based on a clear understanding of the whole super journey…”
