The development of new and innovative retirement income products has been plodding along in the background over the past few years, getting little of the media attention given to other superannuation issues.
Because of people living longer – a girl born today is likely to live to 84.3 years compared with 74.5 in 1970 – it’s important for people to make their super last longer. Most retirees with some super are in account-based pensions. People using these pensions are required to withdraw specified minimum amounts from their account balance each year. If you’re aged 65 to 74, that minimum is 5%. Of course, if your funds’ earnings are greater than this, your balance is not going to reduce!
Currently, if you run out of super, the state age pension is your ‘longevity risk product’.
However, these issues play in a different way from a government perspective. More people living longer means more tax concessions on the tax-free superannuation pensions, a more expensive age pension system to support, and an increasingly expensive health and aged care system.
The government has already pledged (but not yet legislated) to increase the eligibility age for the pension from 67 to 70, and has greatly tightened up the assets test for the age pension. This possibly leaves a few things on their list:
Reduce the time between getting access to your super and being able to get the age pension (so you stay in the workforce and you don’t spend it all too soon).
Link the age pension age to expected life expectancy.
Encourage people to sign up for products that provide built in longevity protection.
The government is working on the last of these by proposing the introduction of a MyRetirement product (to be otherwise known by the ungainly name of CIPR – Comprehensive Income Product in retirement). Trouble is, these involve the use of annuities – and annuities have tended to be expensive, irreversible and inflexible.
Companies like Mercer and Challenger are extolling the virtues of their annuity products, and some super funds are releasing different types of hybrid products, but overall there doesn’t seem to be a big unmet demand for annuities.
The Financial System Inquiry (the Murray Inquiry) suggested that some form of CIPR should be the default retirement product but not all studies have endorsed this approach.
The Productivity Commission, for example, has recently come out and said a ‘MyRetirement’ default is not warranted. They concluded that the complex nature of individual and household financial circumstances means there is no single retirement product that can meet members’ needs.
Changing needs, work patterns and advice requirements also add to the complexity of this issue, and this author at least believes it would be a big mistake for the government to rush things or put mandated structures in place.
Funds are increasingly focused on improving the member experience for their retired and retiring members but it would be a mistake to think that the MyRetirement/CIPR framework is going to be delivering for funds anytime soon. Funds need to grasp the current challenge to provide better services for these members rather than waiting on the government to solve the problem for them.
Outside of the workplace, employees make important decisions that affect the lives of the people around them everyday. However, those workers are rarely provided the same level of input and authority over how they perform their own jobs, lead and run a team, or make decisions that impact a customer.
IQ Group has decided to turn the traditional hierarchy model on its head, and embrace a ‘Natural Teams’ leadership approach.
Natural teams bring together a group of highly skilled employees and provide them the responsibility and authority to nominate their own team leadership.
By embracing natural teams, IQ Group seeks to achieve the things that matter:
Help our people feel connected with their team and team leader
Build teams that can adapt to changes in business, client or personal circumstances
The autonomy provided by the natural teams model takes full advantage of all team members’ skills, talents, experience, and ideas.
“Natural teaming should provide IQ Group with access to, and leverage of, as much of its talent as possible,” said IQ Group’s CEO, Brian Peters, “It is akin to a sporting team, where different players come onto the field at different times to help achieve the overall purpose.”
The teams that will form as a result of this new approach will not be a one size fits all; they will come in many different sizes, with many different skills, and work together harmoniously if they trust each other and have a clear view of our purpose.
The success of this initiative is dependent on employees having a strong trust in their team leaders, who will act in a way that supports and enhances our people, and our business. The move toward natural teams is the next step in our journey toward becoming a more agile and responsive organisation equipped to navigate what the future holds for us.
“We all play multi faceted roles, being both a challenge and benefit of the industry we work in – consulting, where two days are rarely the same,” said Peters.
With fund mergers, transitions and successor fund transfers dominating the superannuation industry over the next 5 years, we take a look at the 5 key considerations when undertaking a fund transition.
Superannuation is being hit with a record number of changes. The Productivity Commission is calling for the consolidation of funds, fewer member accounts and products, and increased reporting standards. The governments’ 2018 – 2019 budget is reducing duplicate member accounts by transferring inactive accounts with low balances to the ATO. All in the context of a fiercely competitive landscape!
Over the years IQ Group has provided transition capability, advice and quality assurance for many trustees and administrators. We have found there are several key lessons of a transition that parties often underestimate.
The five key considerations for beginning a fund transition:
Trustees are accountable to the member and regulators – Accountability can’t be outsourced. Trustees will ultimately be accountable to the member and regulators for a successful transition, merger or transfer. Trustees need to be very active participants in monitoring, aligning and controlling outcomes, and ensuring transparency and governance for key participants.
It’s always bigger and more complex than you think – This is the biggest project and organisational change initiative most funds will undertake. Even the funds that have undertaken a merger or transition are likely not to have done so for some time. This means the skills and knowledge are not usually readily available in-house.
Data is everything – Ensuring all data is transferred, tested, reviewed and reconciled is crucial. This is a significant task that requires extensive planning, coordination and oversight to make sure the move is seamless to the member. If done poorly, data remediation – and possibly compensation – will dominate the funds activities for some time.
Don’t forget the member experience – Most funds have spent considerable time and effort to provide a better digital experience for their members and improved insights into their member base. The digital experience is key to member engagement, so maintaining both the functional richness and availability through all devices is key.
It’s not over until it’s over – Transitions typically take much longer than most funds anticipate. Even when the transition occurs on the scheduled date, there are issues to resolve, outstanding tasks, systems and processes to tune and a backlog of work to resolve – not to mention normalising the new working arrangements and getting back into a business as usual rhythm. This process takes time, effort and commitment, and if not done properly the transition won’t be over any time soon. Think if it not like switching trains at the station, but rather moving your members from one moving train to another, it is all in constant motion!
IQ Group is uniquely positioned as the most experienced provider of transition and merger expertise for trustees and administrators. Transitions are complicated undertakings and often the largest project a trustee will undertake. IQ Group provides the expertise to minimise the delivery risk and ensures the member experience is seamless. IQ Group has a track record with each of providing transition capability, advice and quality assurance for trustees and administrators from due diligence to project closure.