A series of “best practice principles” for superannuation retirement income solutions issued by Treasury and currently circulating within the industry make it clear that if data really is the new oil then superannuation funds need to step up their exploration and drilling programs, and fast.
The principles are focused on three core elements: understanding members; providing quality retirement income solutions (principally product); and providing information and guidance. It’s clear that the “understanding members” element is the foundation for everything else: no solution, information or guidance can sensibly be provided if a fund doesn’t know who it’s providing it to.
But access to high quality data is an issue for some funds, as submissions to Treasury consultation on the retirement phase of superannuation clearly revealed. If funds do not deeply understand who their members are, they can only guess at what the best solution for them might be.
The concept of developing member cohorts relies heavily on member data and insights. Treasury’s “understanding members” principle suggests that funds develop “a detailed understanding of the composition of their fund’s membership to support the development and offering of tailored retirement solutions for current and future retirees”. The key term there is “detailed”.
An issue is that members closest to retirement are generally those who joined a fund longest ago, when the data funds would need decades later was significantly underestimated.
Even where a fund knows, say, name, date of birth, gender, email (or physical) address, phone number and Tax File Number (and of course, the individual’s account balance and insurance cover), it’s still quite difficult to make informed decisions about what they’re likely to need in retirement, and how closely they resemble other members in the same fund.
And that’s even before funds try to get a handle on Age Pension status, home ownership and partnered status of members, which the “understanding members” principles suggest they should also factor-in to retirement income solution design decisions.
Treasurer Jim Chalmers foreshadowed the release of best-practice principles last November as part of a package of reforms targeting the retirement phase of super.
Inability to access and share
In submissions to Treasury published in December last year, funds consistently bemoaned an inability to access and share data. For example, Cbus said “it is unlikely superannuation funds will have data on [members’] household circumstances and investments outside of super”.
In its Retirement phase of superannuation discussion paper, published in December 2023, Treasury said that “some funds have advocated for improved data sharing between government and superannuation funds, such as information related to the Age Pension”.
“There are also other avenues for funds to obtain better data, such as requesting the right type of data from their members at appropriate times and becoming a recipient of the member data enabled by the Consumer Data Right,” it said.
“This could cover data relating to private savings.”
Treasury said data is “a critical input for funds to provide better retirement income strategies” and it posed a couple of (non-rhetorical) questions:
- What processes are funds undertaking to collect, analyse, and apply data analysis to understand their membership?
- What barriers are there to better practices, and what policy approaches could help achieve better data use?
In submissions to Treasury, a number of funds put forward ideas and suggestions.
HESTA, for example, noted the Organisation for Economic Co-operation and Development’s (OECD’s) “High-Level Principles on Consumer Financial Protection” framework that provides “consumers should be able to search, compare, share data and, where appropriate, switch between products and providers easily and at reasonable and disclosed costs, for instance by leveraging interoperable systems”.
AustralianSuper suggested empowering fund members to “give their superannuation fund secure access to relevant data held by government, and allowing members to identify themselves to superannuation funds through a government accredited digital identity”.
And Australian Retirement Trust said better data sharing between the government and superannuation industry could result in system-wide administrative efficiencies and better retirement outcomes for individual fund members”, including supporting funds to provide “nudges, guidance, education and advice”.
Do better
Funds have been on notice for some time that regulators expect them to do better on the data issue, as part of a general improvement demanded in developing retirement income solutions, in line with Retirement Income Covenant obligations.
ASIC and APRA released a report in July last year after a joint thematic review on a small group of funds to examine how they had implemented the covenant to date.
Notwithstanding the systemic, privacy and cybersecurity issues attached to more comprehensive data sharing, the regulators set out their expectations that all registerable superannuation entities (RSEs) should urgently address the gaps in their approach, including addressing “fundamental data and analytical gaps to enhance their understanding of members to support effective strategy formulation and deliver useful assistance to members”.
Treasury says its best practice principles for retirement income solutions are “intended to help trustees ensure members are appropriately supported to obtain good retirement outcomes”.
“The principles are not exhaustive, and trustees may wish to develop and offer retirement income solutions that extend on the principles to provide exemplar product and service offerings to their members,” it says.
It would be a good start if all funds could meet Treasury’s proposed guidelines as a bare minimum.
