Superannuation - Digitally engaging with people who are not listening

With stock markets struggling, the AFR has estimated that 15% has been wiped from our superannuation accounts. As always with financial crises, this impacts people getting ready to retire more than it impacts the younger groups. However, it is very likely that people under the age of 35 don't know how it has impacted their Super.

A report prepared for the Australian Taxation Office by Colmar Brunton sought to better understand individuals’ attitudes and values towards superannuation in the wake of the global financial crisis. This report found that younger people were three times less interested in their personal superannuation affairs compared to older people; nearly one-fifth (17%) of individuals aged between 18 and 29 were interested in their personal superannuation affairs, compared to around three-fifths (58%) of those individuals aged 45 years or older.

There are two main reasons for this. The first is that the modern economy has pushed an increasing financial burden onto the youngest working people, so why would they think about their savings when they are focussed on next week's rent? The second is that the superannuation industry hasn't kept up with what people under the age of 40 actually want.

Almost every statistic about under 30 year olds shows they are getting less and less with each year that passes. Prior to COVID, young Australians were already doing it tough. Youth unemployment rates in Australia were more than double the overall unemployment rate and were almost three times higher than for those aged 25 and over.

Under 30s are also paying more for a house compared to income (everyone is).

Commuting distances have increased by almost 30% in the last few years.

Real median disposable income among under 40s has declined in the last 10 years, and mortgage debt has doubled.

The average hours worked by Australians with part-time jobs has grown by around 16 per cent, from 17.6 hours in 1998-99 to around 20.4 hours in 2009-10.4.

So the real pressures on day to day life have increased, why would younger people think about what is happening with their money for something 40 years into the future, when there are real problems today?

This brings me onto the second point, that Superannuation hasn't kept up with expectations. The truth is even though younger (in this case under 36s) people can't do much about their super, they still want to know more. 87% of under 36s want superannuation to be taught in schools. They think that rules around superannuation have changed too much and too frequently, with more than 38% of 18-24 year old fund members of this view.

Cambell Holt, chief customer officer at Mercer, said customers now take their best digital experiences and set them as a benchmark for all other transactions. The “expectation transfer”, as Holt calls it, is driving a new wave of competition in superannuation experiences.

Researcher Investment Trends’ latest Super Fund Member Engagement report, compiled from surveys of the member services and activities of Australia’s largest 44 super funds, has found that super funds are “still learning to manage” their move to the online space

CHOICE (2016) noted that there is need to reframe the superannuation system in terms that young people may understand – “make it tangible”. As the Productivity Commission has revealed, there are 10 million unintended duplicate superannuation accounts, which are being eaten away by $690 million in unwarranted fees and $1.9 billion in unnecessary insurance every year. This is data that could be leveraged, as younger people are more likely to have multiple accounts.

Likewise, embracing digital to transform member engagement will continue to be a major priority for funds, particularly given the growing sophistication of ‘plug and play’ member portals. This will apply in particular to a number of key areas including:

• Personalized member portals
• Robo-advice. ASFA surveyed 15 funds, representing approximately 30 per cent of the assets of APRA regulated funds. While 80 per cent of the funds surveyed saw digital advice as an absolute must for engaging fund members, only 20 per cent are so far investing in it. This percentage is, however, double what it was four years ago, when ASFA last conducted a similar survey.
• Consistent experience across whichever channel a member chooses, including mobile and, now, voice

A survey by the superannuation association shows that while most funds surveyed had spent $2 million or more on digital projects last year, investment has mostly been in establishing foundational capability – such as new websites, member online experience, calculators, data analytics capabilities and upgrades to administration systems. 

Some Superannuation firms are trying to keep up. The IQ Group says that the use of Retirement Income Calculators is up almost 35% year-on-year. Chatbots saw a decline this year. Last year, 32% of super funds offered Live Chat, whereas this year there are 34%. While this doesn’t seem like a huge increase, it is more significant given the 56% drop in chatbot usage in the last 12-months.

It looks like there is a long way to go for more Super funds to keep up and stay relevant. The risk is that the gap for how much people should have saved will increase, or that they would be more willing to accept deals that reduce their superannuation accounts for a short term cash benefit. It is estimated we will need more than $1m in super by the time we retire in order to support us, that means that young people need to be engaged as early as possible.