The Four Engagement Hurdles
The super steeplechase
Retirement saving is a long-term project requiring patience and a keen eye on the end goal. But before Australians can successfully make it to the finish line, they must clear several hurdles ahead of them. Which is when the help of a good superannuation fund – like a good coach – becomes crucial.
There aren’t many things in life that we all must do. The activities we choose to take part in are – more often than not – unique to our values, interests and desires.
Which is what makes superannuation so interesting. We are required to save for our retirement because if it was down to each individual to decide whether to do so or not, many would simply put it off. A problem for another day.
Instead, it is legally mandated that we all take part in this activity, much like school sport is compulsory for school students.
Some people have no problem with saving for their retirement, in the same way that some students are well suited to participating and competing in their annual school athletics carnival. Research shows that 11% of Australians1 feel that they are well on their way to achieving their retirement goals. They are engaged, they understand how their super is tracking, and they know what level of contributions they need to make to stay on track for the finish line.
But for the vast majority of Australians, participating in our mandated retirement saving system is like running in those long athletics carnival events, but with hurdles ahead of them that can be difficult to clear. For these people, the task of saving for their retirement is arduous, and perhaps not well suited to their level of financial literacy.
For the superannuation funds serving Australians this is a key area of concern. How do you encourage somebody to run to the best of their ability and attempt to clear the hurdles even if they may find it difficult, or are not really interested in the race?
Like a good coach guides an athlete through challenges, good superannuation funds must understand the hurdles standing in their members way if they are to be capable of guiding their members towards the finish line.
Intentions and ownership
The first hurdle retirement savers must clear is their intent to take ownership of their retirement savings. Our research shows that roughly 20% of Australians demonstrate little to no intent to engage with their retirement savings and have almost no understanding of super and how their retirement savings are tracking.
For superannuation funds, responding to this challenge it requires them to ask tough questions of themselves, including how robust their efforts to engage their members are. Super funds with a strong track record of engaging their members have mastered the art of getting the right message, to the right member, at the right time.
Something to strive for
Whether an athlete or a retirement saver, having a goal to work towards is a crucial step in driving better outcomes. Goal setting is key in any superannuation engagement program that seeks to improve member outcomes. Members that have a clear obtainable personal goal much like a vision for the finish line in a race not only provides short-term motivation but also helps the member stay on track for their long-term vision. In retirement saving, it’s another hurdle that many Australians struggle to clear.
Research shows that roughly one third of retirement savers have thought about their retirement savings but haven’t yet set a goal for how much they need to have accumulated by retirement (or the retirement income required to fund their desired lifestyle in retirement).
Desired lifestyle in retirement is inherently personal. What’s ‘comfortable’ for one person might differ markedly from what’s ‘comfortable’ for another. Which is why it’s so important that funds help individual members set a goal that reflects the income that will be required to fund their desired lifestyle, across various expenditure categories such as travel, transport, healthcare, eating out etc.
Meaningful goals bring action. Our research demonstrates that retirement savers who have set a personalised retirement income goal are 67% more likely to make voluntary contributions1, relative to those who do not. By making the process of setting a goal for their retirement lifestyle meaningful for their members, good superannuation funds are halfway down the track of engaging the member in their retirement journey.
Tracking the run
Athletes and their coaches are guided by data. They track their achievements constantly, observing training inputs and measuring the output they deliver in competition.
Similarly, in superannuation, it is just as important for members to be able to track their progress to their retirement income goal.
When members can easily see how they are tracking – just like how a runner can see their time in the seconds after they cross the finish line – they are more likely to engage and commit to more disciplined behaviours in pursuit of that goal.
For super funds, this means providing members with an easy-to-understand means for tracking their retirement saving progress, e.g. their retirement income projection relative to their retirement income goal they have set. Research shows that roughly 32% of Australians know how they are tracking, but don’t know what to do to get or stay on track.
Sometimes things need to change to improve. Tracking provides an important feedback loop, indicating when to consider adjusting inputs in a bid to optimise performance. For an athlete this might be nutrition and training loads. In retirement saving, this is often the level of contributions a member makes towards their superannuation, or the way that their accumulated savings are invested.
Once it’s established how each member is tracking, super funds can make it easy for members to understand what steps they need to take to get or stay on track. For instance, altering the level and frequency of contributions, which generate around 10% of a typical retirement income. Or, by understanding that investment earnings account for around 90% of a typical retirement income, optimising the members’ balance of risk and return in the form of a personalised investment strategy.
Whether it’s guidance on contributions or investments personalised around their goal and financial circumstances, super funds should be like good coaches – ready to provide personalised guidance towards the ultimate end goal.
Just 11% of Australians have cleared each hurdle and feel like they are on track to achieve their retirement goal. This Olympic year, the superannuation industry should take heed from the thousands of athletes preparing to perform at their personal best and consider how they might be able to guide their members over the hurdles that stand ahead of them and grow that number.
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* Jodie Hampshire is Russell Investments Managing Director, Australia and New Zealand
1Russell Investments Making Super Personal white paper