In Australia, the focus within the superannuation industry for the past thirty years has been on accumulation of savings. Over that period, product development has been driven by accumulation needs, and super funds have focussed on acquiring members saving for their retirement. Product differences between accumulation and post retirement products mean that many retirement products have not been easily supported by traditional systems, particularly annuities and protection products.
Retiree numbers are starting to increase significantly as baby boomers enter retirement and their income and growth needs are now becoming evident. This was particularly thrown in to focus when the GFC delivered rapid depletion of the capital of many pre- retirees, diminishing their income earning capacity throughout their retirement. The financial needs of retiring superannuation fund members are now starting to emerge, and the industry is looking to deliver new solutions designed to meet the specific needs of retiring members.
New product development work is throwing the sufficiency of existing administration software sharply in to focus. Innovation is driving the development of new retirement products, which older technology designed for the accumulation phase battles to support efficiently.
What are the technology considerations of product developers addressing the needs of retirees? First and foremost is the need to deliver the flexibility to develop new products quickly and cost effectively. Technology that enables rapid product builds without IT involvement is available today, and will allow superannuation funds in the future to respond to client needs and market challenges effectively. Using this technology, superannuation funds can lay foundations for the future, by ensuring that technology supports their strategic direction. These systems will be characterised by the following:
- The ability to support accumulation, transition and retirement phases of the customer life cycle. By offering the full suite of products, members’ needs can be addressed throughout their whole lifecycle, enhancing the ability to service customers effectively and reducing the complexity and cost of the operational support.
- Built to support the needs of investment, insurance and income products from first principles. This will mean that systems will need to differentiate between capital and income components and manage non-unitised assets.
- As superannuation funds are likely to work with third parties to deliver new products (for example, life companies), their systems will need to allow funds to leverage outsource relationships and specialist products while keeping close control over the member experience. Successful super funds will offer members a seamless experience despite the involvement of third parties, rather than a sense of being handed over to a third party provider
- The ability to meet the needs of members for on-line capability. Retired members are likely, over time, to become more engaged with their superannuation than they were prior to retirement. They will increasingly expect online tools and calculators to enable this. For example, forms will need to be available on any device, pre-populated with member details from the underlying system, allowing customers to progress to next steps in real time. They will want to contact a financial adviser, “chat” to customer service or initiate an application process in real time.
The key to operating successfully in the post retirement world will lie with an ability to understand retirees’ changing needs. Funds will need to look outside historical approaches. For example, semi-retirement could well become much more common, as will re-entering the workplace after retirement. Aged and medical care will certainly become increasingly important considerations for retirees, who will look for financial products which support these requirements. With extended longevity likely to be a consideration, there may well be a developing need to release equity from property through innovative products, potentially supported with tax or social security advantages.
If we are really thinking long term about laying foundations, we need to consider what retirees are doing holistically. Importantly we need to ensure the foundations we lay now can extend to future relationships and suppliers, perhaps in aged and health care, banking, and property.