The $300 billion profit-to-member fund has linked up with Oxford Properties for a portfolio of high-quality European industrial and logistics assets that it wants to expand significantly over the next three to five years.
Australia’s megafunds are looking to international asset owners for ideas on how to invest what will soon be trillions in retirement savings. But banks – with their sharp focus on efficient implementation and balance sheet management – could also be a source of inspiration.
Retirement products present their own dilemmas
(pictured: Michael Dundon)
The separation of fund investments between accumulation assets and retirement assets has become a new topic for study by big super funds. At the Frontier conference two executives of big funds analysed this and other retirement product issues.
David Carruthers, the Frontier senior consultant who led the discussion with the $13 billion VicSuper and $85-90 billion AustralianSuper, said that, as FUM grew, there could be a benefit in the separation of assets.
However, Michael Dundon, the chief executive of VicSuper, said that his fund reviewed the situation about twice a year and had still not seen a point whereby the fund would benefit from splitting the management of the assets.
“We’re probably close to a tipping point,” Dondon said. “But there are added costs to consider. There’s additional custody fees and we still want some more clarity around tax treatment. At some point we will probably do it.”
VicSuper, representing a lot of Victorian school teachers, many of whom are retired, has a different membership profile to that of industry funds. The average balance among its pensioners is $300,000 and they are serviced by 50 financial advisors who engage in “pro-active” campaigns to encourage increased savings.
Andrea Titter, the product manager for retirement income at AustralianSuper, said that her fund had about 300,000 members over the age of 50 (AustralianSuper has a total of 2.1 million members). “How do we get to them all with advice? We need to look at ways such as our ‘smart default’ for our account-based pension. This is a ready-made option that packages up investments with payments…. It’s an easy way to get a pension without being locked in.”
Carruthers noted that in retirement members of both VicSuper and AustralianSuper were much more engaged. About 80 per cent across both funds settled for the default fund option in accumulation, but only 30 per cent of VicSuper members and 40 per cent AustralianSuper members did so in retirement.
VicSuper is in the happy position to have about 90 per cent of its accumulation-phase members move across to remain within the fund and move across to its pension options.
Titter said that funds needed to listen to their members more. She said advice needed to be scalable, such as robo advice, and presented as the members wanted – not from the viewpoint of the actuaries and planners who designed the questions.
For instance, in one case the transition to retirement (TTR) calculator of a fund asked the member where he/she had another super fund account. “Most people don’t want to answer that,” Titter said, “because they expect the fund will try to sell them something.”
Dondon said he thought robo advice would become a useful tool but would evolve to be more about education, with a brief “fact find” for the member and perhaps using “gamification” techniques for engagement.
“Then the secret will be to get them [members] to talk with someone either face to face or on the phone,” he said.
