The Retirement Income Covenant has turned the spotlight on post-work life. Given the talent shortage, Fintan Thornton from Allianz Retire+ reckons it's a great time to get into this sector.
The Retirement Income Covenant kicks in next July. Are super funds switching focus from wealth accumulation to designing retirement income products?
Yes, it's certainly true that super funds - across industry, public sector and retail funds - are increasingly focused on how they evolve their retirement offering for members. This has been buoyed by an ageing demographic, as well as policy reform by way of the stapling legislation as new member inflows are challenged for some funds.
Some super funds are responding by creating specific retirement teams, or specialist roles such as 'head of retirement' and support functions, to help them figure out their retirement strategy. Others are working with actuarial consultants and/or specialist retirement firms, such as ours, to partner on retirement product solutions.
Is there a shortage of talent in the sector?
The simple answer is, yes. There are specific skillsets required to support the development, management, marketing and distribution of these retirement products and I would argue that there isn't a deep and established pool of specialist talent in the Australian market today. But I think that is a direct reflection of the fact that the retirement or 'decumulation phase' is well documented as being the forgotten child of the superannuation sector. That's an unsurprising outcome when the regulatory focus and the superannuation sector narrative has been on the accumulated returns on members money.
Given the government's micro reform agenda of Protecting Your Super, Putting Members' Interests First, Your Future Your Super etc., there's a lot of capability within product teams focused on 'accumulation phase' but few who would claim to be experts in the 'decumulation' phase'
It's a complex challenge and often the standing response has been that "it's only a small percentage of our members". But that's changing - and fast, for some super funds.
With Funds prioritising member retention efforts and the overarching emphasis on member outcomes, we're seeing more and more talent emerging. I see this trend continuing and its heartening to see super funds recognise that they need to allocate specific people, resources and accountabilities to the retirement agenda.
The good news is I think that's starting to change. 'Decumulation phase' is budding, it's burgeoning. It's a great time to get into this space.
What sort of skills are required for people wanting to move into the space? Is the retirement sector a good career move?
I think if you asked any of our staff if retirement is its own career path, they'd passionately say "yes". Our people are purely focused on retirement - meaning collectively they offer a truly unique level of understanding of retirement. At the end of the day they deliver products, tools, education and tech that supports retirees, their advisers or super funds. But to do that they need to have an innate understanding of what people need and want in retirement and that's holistic. Add in deep expertise in investments, risk transfer; as well as the myriad of changing rules and regulations across both superannuation and life insurance. If that isn't a career path, I don't know what is.
If we look more long term, there is said to be $100 billion moving into retirement phase every year by 2025. Retirement is huge. This train is already well in motion, so I think it's a case of "if you build it they will come". We need the best minds on the job, whether they be actuaries, analysts, customer or member experience, technical specialists. I'm sure we will see greater focus and interest from talent already in our super sphere. It will be those with a practical understanding of the Australian market who have been so focussed on accumulation, finally turn their hand to immersing, and specialising in retirement.
Aside from talent what are the other challenges facing the retirement sector?
I believe that 'retirement income' is a classic "tone from the top" challenge. The direction from the trustee board is paramount. For example, I'm aware of some funds who are considering setting up a dedicated retirement committee, just like there's a risk & audit committee or an investment committee. The establishment of a dedicated board-level committee would naturally refocus senior executive attention, which would flow through the super fund and talent management process.
The other enabler is the advancement of technology. As highlighted by the review, while our system is sound, it's complex to navigate given means testing of the age pension, etc. Since it's a compulsory superannuation system, there is an onus on the government to better enable super funds and financial advisers to more easily improve the richness of information on retiring super fund members. Through digital IDs, we believe that repositories such as MyGov could play a game-changing role in closing the information gaps to allow super funds to position better options and product solutions for retiring members. Imagine a retiree being able to seamlessly see how their private retirement income and age pension are forecast to change over time as they near retirement. It would bring more comfort, peace of mind and assist in retirement planning.
What is your take on how this is all going to work?
When we started our institutional business, our initial aim was for 'retirement incomes' to be a top three priority for super fund trustees. Alongside consolidation and regulatory reform, its firmly now a key focus area and for some funds, it's their primary focus. The next aim is to see innovative product and member experience advancements that will flow from this heightened focus on retirement. The covenant is a big deal and represents a significant opportunity for super funds to set themselves up on a long-term growth trajectory - retirement is the new battleground for both retention and acquisition!
After 30 years of compulsory super and tinkering around the edges on retirement, as an industry, we have a huge opportunity to get this right for people. It's very exciting.