Raising engagement with super is easy: reduce the preservation age, the age when you can access super.
While reducing the preservation age would certainly lift engagement, it would be disastrous from a public policy perspective
Despite the size and global status of Australia’s superannuation system we have a fundamental problem: as members we typically do not engage with our super until retirement. On the face of it, this is understandable given the long term nature of super. However it contributes to inadequate superannuation balances which put a drain on government balances and increases the likelihood that members will not have sufficient super savings to enjoy a comfortable retirement.
Engagement in super does not mean that members must know their account balance at any given time or for any given year. In fact it has been argued that this level of engagement can be detrimental to a member’s retirement income as it fosters obsessive tinkering with investment strategy choice and allocation.
Improving engagement is about raising member awareness, interest and understanding. Being more aware and having an understanding of your superannuation increases the likelihood of having sufficient savings for a comfortable retirement. With improved knowledge it is easier for members to determine an income target for retirement and the balance needed to achieve this, well ahead of retirement.
While there are many ways and approaches to optimise engagement, it is critical to use an approach tailored to the needs and desires of each member.
For example, digital solutions are more preferable to younger members, while a direct, face-to-face approach, is preferred by older people, especially once they have retired. Communication that resonates with the member will optimise their experience and interaction with the fund, resulting in higher member satisfaction, loyalty and retention; critical in this highly competitive industry.
Importantly though, funds need to be conscious of the anticipated demand and reach of their approach. Relying on face-to-face channels (advice, seminars, etc) to improve engagement can be more than problematic when the fund has more than 1,000,000 members. Funds need to consider innovative, digital solutions, such as easily accessible online advice. Ultimately, the method of interaction should be convenient, relevant, desirable and meaningful for the each member. It is not a one solution fits all.
There are a number of initiatives that can be undertaken by funds to improve engagement with their members. Additional benefits is something many superannuation firms already offer, but rarely advertise. Immediate and tangible benefits give a reason for members to keep contact with their funds. Providing members with non-superannuation benefits such as discounted banking products, car and health insurance, access to digital advice, budgeting tools, gym membership or sponsorships of a local sporting club or community association are all possible relationship benefits for members.
From a regulatory perspective, the government could consider providing a tax offset on concessional contributions above superannuation guarantee caps for members under the age of 35, up to a specified limit. This should encourage younger members to make additional contributions to build their superannuation balance, increasing the likelihood of achieving a comfortable retirement through adequate retirement incomes.
Improving member engagement with super is not about ensuring that members read everything and know their return and account balance for any given year. Engaging members is about increasing their awareness, interest and understanding in superannuation. To do that, the superannuation industry collectively must engage members through innovative channels that resonate with the needs of members and deliver tailored and targeted messages.
The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International.