UniSuper, the $50 billion superannuation fund for Australia’s higher education and research sector, has developed a custom Retirement Adequacy Index to more deeply understand how members are tracking toward their retirement income goals and inform how it can best help members reach their desired standard of living in retirement.
Superannuation funds have traditionally relied on the ASFA Retirement Standard to benchmark how members are tracking to retirement income adequacy. However, rather than use a fixed-dollar target, UniSuper’s new Retirement Adequacy Index uses salary-based targets to determine more individually relevant indicators of members’ progress in attaining a level of retirement savings needed to maintain their pre-retirement standard of living.
Kevin O’Sullivan, UniSuper CEO, said for funds such as UniSuper, with a base of largely professional members who tend to have higher salaries, the ASFA Retirement Standard can be a misleading benchmark.
“While a dollar-based approach can assist members to understand retirement targets, it is likely to be a better measure for lower income earners,” Mr O’Sullivan said.
“Salary-based targets that measure an individual’s retirement income as a percentage of their pre-retirement salary are likely to be a better measure for middle to higher income earners. This can help project how their standard of living in retirement might be aligned with that enjoyed during their working lives. For many people, aspiring to post-retirement income of about 70% of their pre-retirement income can be a realistic goal to enable them to enjoy a comfortable retirement.
“Pre-retirement incomes and post-retirement lifestyle expectations are different for every member, so a challenge for superannuation funds is developing data that is accurate and relevant for individual members. The Retirement Adequacy Index provides a dynamic approach to assess how members are tracking to their individual retirement goals.”
UniSuper engaged global advisory firm Willis Towers Watson to examine the retirement preparedness of its members against this new benchmark using each individual member’s salary, age, contribution patterns and current balance.
The findings highlight the ongoing importance for members in the higher education and research sector to focus on retirement adequacy. With relatively high standard contribution rates and above average balances, a large proportion of UniSuper members are currently projected to achieve appropriate post-retirement incomes. But projections also indicate that about a third of UniSuper members will likely rely heavily on the Age Pension in retirement.
Personalising superannuation
UniSuper plans to use the model to benchmark how members’ outcomes shift over time and to enhance and better tailor its support to members through webcasts, education workshops, advice and online tools – encouraging members to think more about their retirement positions.
In one initiative, the fund recently launched Compare me, an online comparator tool that provides UniSuper members with an indication of how their super savings are tracking against other peer fund members with a similar profile, based on age, gender and product.
“Retirement adequacy is a big issue for all Australians. We are committed to helping our members address this issue sooner rather than later and this Index is another tool to help ensure our members have a clear indication of how they are progressing toward their retirement goals,” Mr O’Sullivan said.
