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Sunsuper uses behavioural finance to design pension product

Dan Purves




Sunsuper has factored members’ financial behaviour into the design of its new pension product in a bid to increase engagement and take-up of income products in retirement.

The pension product includes a bonus of up to $2400 for eligible members when they retire, which is used as an incentive to get them to plan for their retirement.

“There will be a number of proactive engagements we make along the way to make sure they are aware of this bonus and really encourage them to think about it,” said Wanda Britton, head of product at Sunsuper.

“We are the only fund in market where a member can easily and transparently see how much bonus they are eligible for and can plan in advance.”

Britton added what makes Sunsuper’s bonus unique was its guaranteed nature, as it was not tied to the members’ investment choice, the investment climate or the tax position of the fund, whereas bonuses offered by other providers require members to have a line-of-sight on these areas.

“When we did the modelling around it, a member could look today and they might be entitled to a bonus of $3000, for example, but tomorrow, depending on what the tax climate is doing and what the economic conditions are and their investment choices, it might be zero, and when you are planning for retirement that is really difficult.”

In contrast, she said the predictable nature of Sunsuper’s bonus meant members could start planning five years before they retired.

The bonus is to be funded from a reduction in the tax payable when members roll their funds from an accumulation account into a pension income account at retirement. It would be calculated at 0.30 per cent on a member’s balance up to a maximum amount of $2400.

Previously, Sunsuper spread the money received from no longer having to pay capital gains tax when a member moved into deaccumulation across all members, including those still in accumulation, but it was decided to be more equitable to target that money to the individual retiring member.

“The members that are actually entitled to that bonus are now the ones who will be receiving that bonus,” Britton said.

As the adult learning style means information generally takes longer to sink in and needs to be repeated a number of times, the bonus, and through it the pension product, will be promoted to members starting from five years prior to retirement.

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    “It is not just the bonus itself. The bonus is helping us to engage members and help members think about retirement income. But it’s also about how do we make it a simple and a seamless transition to retirement at a click of a button,” Britton said.

    “They’ll be able to see what their predictable bonus is and, if they are in retirement phase or at their preservation age, they simply press a button on the website and it takes them through to our online joining portal and that is a straight through process.”

    A few months ago Sunsuper soft launched its Member Online website which allows members to apply and start their pension the next day and, according to Britton, the super fund is now getting about 30 per cent of its pension flow joining direct online.

    The pension product with the bonus is due to launch on June 1.