The concept of superannuation as a tax-effective retirement savings vehicle is failing to resonate with young people, despite continuing efforts from the industry to engage the younger generations.
CoreData’s 2016 Member Engagement Report found just two in five (41.3%) Gen Y members are engaged, down from 47.4% last year and in line with a broader decline in engagement across the industry this year.
The research revealed the proportion of engaged members in the industry has fallen to around half (51.4%) from 56.2% last year, while the proportion of disengaged members has risen to 48.5% from 43.7% in 2015.
This year also saw a rise in the number of highly disengaged superannuation members to nearly one quarter (23.8%), up from 18.8% last year.
Kristen Turnbull, Head of WA at CoreData, said funds had their work cut out, especially among Generation Y who remain the least engaged generation.
“If super funds have any hope of engaging the younger generations, they have to stop talking about retirement,” she said.
“There’s a fundamental flaw in the marketing of super as a retirement vehicle for young people – and that is that many Gen Ys can’t and don’t envisage a time when they will no longer be working.
“The super industry needs to reshape the conversation they’re having with younger members to recognise that phrases like ‘retirement planning’ aren’t going to get the cut through they need to convince younger members that super is a viable investment for them in their 20s, 30s or even 40s. Many people legitimately think they’ll remain in the workforce well into their 70s.”
Source: CoreData. Click to enlarge
Fall in fund satisfaction
These findings reflect a fall in overall super fund satisfaction this year, with more than two in three (68.8%) respondents satisfied with their main super fund, down from nearly three quarters (73.5%) in 2015 and slightly ahead of 2014 (65.6%).
Compared to 2015, satisfaction declined across all categories except for problem resolution. The highest rated fund trait overall is online service (65.8%), followed by website (65.1%) and investment performance (61.5%). However, satisfaction with investment performance suffered the most substantial decline, falling 10 percentage points this year.
Industry funds fundamentally trump retail funds in engagement (50.7% vs. 45.7%) and advocacy (55.7% vs. 44.6%), however it’s the public sector funds that have the highest level of engagement among members, with nearly two thirds (64.5%) engaged.
Advice take-up improving
Take-up of super fund financial advice services has increased year-on-year to more than one third (34.1%) of members, from 31.7% last year.
However there remains work to do to improve both awareness among the broader member base and take-up among younger generations.
Two in five members are unaware of whether or not their fund offers financial advice services (41.7%) – similar to last year (40.9%) – and nearly half (45.4%) of those who haven’t used their fund’s advice services say they would be likely to do so if they were available.
The research also found Gen X are the least likely to have used their super fund’s advice services (19.8%) while Pre-boomers are the most likely to have done so (48.4%).
“There’s strong latent demand for advice but funds are falling at the first hurdle with so many members still unaware whether or not they can seek advice through their super fund,” Ms Turnbull said.
“While increasing conversion rates among those members who are aware these services exist is clearly important, the bigger opportunity is building awareness among that large cohort of members who say they’d be interested to seek advice through their super fund if such a service was available.”
Source: CoreData
