Many superannuation funds see themselves as a fund for life. Much time and resources are spent on helping members to grow their super in the accumulation phase. Ageing memberships also mean more time and resources are now being spent on the retention of members at retirement.
But how well are super funds catering to the needs of members in their post-work lives to ensure they truly are a fund for life? What are the needs of ageing members and how can funds best engage with them?
Retirement has retired
Retirement is now viewed as a ‘second act’ where personal growth, expansion, learning, socialising, and contributing to the community are important in ensuring a happy (and long) retirement. It’s no longer just about recreation. The concept of retirement as ‘slowing down’ (and sometimes viewed as ‘retiring from life’) is dead. So, too, is the idea of being in full-time work one day and retired the next. Now, the journey into retirement might mean transitioning through part-time or contract work, a late in life career change, starting a business, volunteer work, or taking up further study.
This ‘new retirement’ changes what funds should communicate, the modes of delivery, and the supporting services they offer to members. Increasingly, there is emphasis on planning for retirement holistically, taking into account relationships, health and wellbeing, as well as finances. Retirees want a fulfilling and meaningful post-work life, not a perpetual holiday.
Not one homogeneous group
Super funds have historically viewed retired members as one homogeneous group, but ageing members are incredibly diverse. Think about the needs and lifestyle of someone in their 60s compared to someone in their 90s? Then add in the complexity of personal circumstances – someone in their 60s bringing up teenage children in a blended family with a mortgage and school fees has a completely different set of needs and interests to a debt free 60 year old with adult children and grandchildren.
The importance of segmentation and tailored, personalised communication is just as important in the post-work phase as in the accumulation phase. Member profiling and segmentation based on behaviours rather than physical age is important. And its importance is going to grow given the post-work cohort is getting bigger as our population continues to age.
Fear of outliving savings
One of the biggest fears of retirees is outliving their retirement savings. With rising lifespans, members can now look forward to up to 40 years in retirement. At the same time, more and more retirees are still paying off a mortgage, many are still supporting adult children, the divorce rate amongst retirees is increasing and many are forced to retire earlier than they would have hoped.
The role of property as a retirement asset is also undergoing generational change. Many of today’s retirees own prime land or inner-city property and they’ve had strong capital growth since 1992 – giving them the choice of downsizing or leveraging that asset for retirement income purposes.
The next generation of retirees will be in a different position. For them, housing is increasingly out of reach, which means they’ll need to rely on their super or other investments as the primary income for retirement, which may include paying rent.
Funds can assist members in addressing both a shortfall in savings and ensuring available funds last as long as possible.
Age is about mindset, not physical age
The concept of ageing is being reinvented. Good health is viewed as something that can be maintained for longer, and so, if you’re living a healthy lifestyle, age is more about mindset than physical age. Many people in their 60s do not consider themselves old (it’s the new 40s), and 70 is the new 60. Unfortunately, 80 is pretty much still 80 because of declining health, but the point is, retirees don’t see themselves as old until declining health plays its part. Leading funds recognise this by engaging members with lifestyle-based communications that talk to members’ interests, rather than communications that are triggered primarily by regulatory change.
Three phases of ageing have different needs
Research suggests there are generally three post-work stages of life – an active phase, followed by a sedentary phase, and then a dependency phase. The active phase is usually the early years of retirement, the sedentary phase is when health starts to decline, and the dependency phase involves a need for aged care or assisted living.
These phases don’t apply to all and vary in length across individuals, but research tells us that expenditure levels vary at each stage. This has implications for the products and services funds offer to members. Funds can assist members to prepare for and navigate each stage with flexible products and services that cater to changing circumstances.
Members want funds to play a role in aged care
Health care and aged care costs are increasing due to our ageing population. Greater pressure is being placed on the individual to fund their own health and aged care costs. A 2015 survey by CoreData, undertaken on behalf of ASFA, found that more than half of the respondents thought super funds should play a greater role in helping to organise and pay for aged care.
More than half of those surveyed over the age of 45 were currently dealing with, or had dealt with, aged care management issues for themselves or family members. The majority dealing with the aged care system found it difficult or somewhat difficult. There is considerable demand for super funds to provide education and advice on aged care, with 60 per cent of members likely or very likely to take those up.
Fresh ideas on reshaping services and communications
A fund for life means engaging with members, no matter what their life stage or circumstances. Weight of post-work numbers means super funds will increasingly be called on to cater to the needs of their ageing members. Leading super funds will remain competitive by moving beyond the traditional realms of accumulation and retention at retirement by understanding the needs of ageing members and delivering services and communication to match those needs.
Ideas to consider
Here are some ideas for reshaping services and communications aimed at your more senior members:
Can aged care advice be incorporated into your comprehensive advisory services? What about tools and information that members can self-service?
Audit your content, images and information channels aimed at retirees with a fresh eye. How well do they match with the lifestyles of members, their interests and needs?
Put your retirement planning information to the test. Is it purely financially focused? All about regulatory change and not much else? Consider broadening to more of a holistic approach.
Consider telling stories to win the current and future generation of retirees – facts are great, but stories capture hearts.
Don’t ignore the power of personalised data projections provided in engaging ways. Why not tell members exactly what their chances are their super will last their lifetime – and what to do about it if they’re falling short?
Consider retirement income solutions that provide the flexibility to match the changing
expenditure patterns of post-work members at the different phases of ageing. Are you addressing each phase?
Take a fresh look at what you are doing to meet the needs of retired members. A fund that does this well will truly be a fund for life.
Written by Ian Taylor, Principal Consultant and Chris Dvoracek, Director Transform for the October 2017 issue of Superfunds magazine