Pre and post-retiree uncertainty offers super funds a $480bn opportunity

18 March 2015
Pre and post-retiree uncertainty offers super funds a $480bn opportunity

Financial advice key to retention

A high degree of uncertainty among pre- and post-retirees when it comes to retirement options represents a $480 billion opportunity for super funds, new research from CoreData has revealed.

CoreData’s 2015 Post-retirement Report, which examines member attitudes, intentions and awareness of funds’ retirement services offerings among those aged 45 and older, found 40.6% of pre-retirees and 32.4% of post-retirees were unsure which type of fund would provide the best overall offer in retirement. The research also found one quarter (24.8%) of respondents were uncertain about which retirement income provider they would choose.

Andrew Inwood, principal at CoreData, says: “Based on our research and ATO/APRA superannuation balance data for pre- and post-retirees, we estimate this uncertainty represents a $480bn opportunity for funds. To claim their share of this pie, super funds must clearly communicate how their products offer the best overall retirement solution. Marketing is key.”

Lower fees and advice key to retention

Offering lower fees remains the number one action super funds can take to retain members. Three in five (59.6%) pre-retirees in APRA-regulated funds said low fees would encourage them to stay with their fund in retirement.

Financial advice is also seen as an attractive feature, with two in five (42.3%) saying the offer of financial advice services would encourage them to remain with their fund.

“Our research shows that financial advice has potential to become a stronger retention lever, perhaps easing the pressure to lower fees”, Inwood says.

Pre- and post-retirees need financial education

Strong demand for financial advice among pre and post-retirees likely reflects that only 29.2% rate their superannuation knowledge as strong or very strong, on par with 2014 (29.8%). Likewise, those who rate their superannuation experience as strong or very strong has fallen marginally from 27.8% in 2014 to 26.1%.

When it comes to investments, just one quarter (26.5%) of respondents rate their knowledge as strong or very strong – similar to those who say their investment experience is strong or very strong (24.7%).

“Overall, we’ve found there is a low understanding and knowledge of what’s needed to achieve a successful retirement, particularly among pre-retirees,” Inwood says. “Although awareness that super funds offer advice is up from 59.6% in 2014 to 69.7% this year, less than half (46.4%) of those who are aware have used the service. This suggests a significant opportunity to engage members with marketing that promotes the value of advice at this important life stage.”

Latent demand for scaled advice

CoreData has uncovered a growing latent demand for scaled advice among pre and post-retirees in APRA-regulated funds. The majority of those surveyed (60.2%) said they would be likely to use a scaled advice service offered by their main fund, up from 56.2% in 2014.

Interest in scaled advice is higher among pre-retirees (64.3% vs. 52.9%) and strongest among corporate fund and industry fund members (75.0% and 67.6%, respectively).

“Our findings suggest that scaled advice may offer a more appealing gateway to financial advice services, especially among pre-retirees. Indeed, offering scaled advice could help funds harness the power of advice to retain members – perhaps even tap the $480bn opportunity our research has highlighted,” says Inwood.