AustralianSuper’s default-style option in its new retirement product has led it to being on track to achieve a 30 per cent take-up.
The new product was launched three months ago and has already achieved more than a 10 per cent take-up from non-transition to retirement members, and is increasing month on month, according to Andrea Titter, product manager retirement income, product, at AustralianSuper.
“Research for the cohort we are looking at indicates that we should be looking at a 30 per cent take-up rate. It’s been very successful up until now and we are on track to be seeing that. The feedback from the contact centre is it has been greeted very positively,” Titter said.
Simplicity and ease of communicating to members were two key criteria in the product design, as research had shown that many were overwhelmed by complexity, leading members to withdraw money from the super fund and put it in vehicles they did understand, such as term deposits.
“When it comes to retirement, that is a general theme. Members are overwhelmed by the choices, they are overwhelmed by the products presented to them, they are overwhelmed by the hoops they have to jump through to get the age pension and they are overwhelmed and daunted by advice,” Titter said.
She added, originally, they thought they were helping out by asking members questions.
“We hit them with a whole heap of questions. ‘How much do you want to get paid? Do you want a fixed amount? Or do you want a percentage? Do you want that indexed? Do you want CPI? Do you want percentage on top of that? And when do you want to get paid? Fortnightly, monthly, quarterly?’ And they are going ‘a term deposit is looking really good at this point in time’.”
Based on this insight, the super fund created a ready-made package within the product, based on modelling they believed to be an appropriate solution for the cohort. The target segment of members was those with a more modest balance, which were most likely not to get advice.
Because of this, Titter said she wanted it to be very simple for them to understand and didn’t want an expensive solution that passed costs on to members.
“What we have done to help them is to help them to default through to a retirement income. This is where the ready-made option in our product has come about. It is almost a proxy default for them, a MyPension tick-the-box type of thing,” she said.
Another important feature, with it being a default-type option, was the ability to be flexible later on, as many people don’t know what retirement is going to be like until they reach it.
“If they feel they want to be more conservative in their investment, they can do that. If they need to change the amount of income you draw down, they can do that. That’s been great because they do not feel they are being locked into something for the rest of their lives.
“As we’ve said before, retirement is so different for so many people that one solution is not going to be for everyone. But we do believe this is successful, based on the numbers in the first three months, it is highly successful,” Titter said.