I’m not a financial adviser, but that doesn’t stop everyone, from colleagues to family members to my hairdresser, asking what they should do with their super.
And it’s no wonder, given the number of different messages and league tables and comparisons thrown around to add to the confusion of what is already a pretty complex product for many people.
When I recently compiled a spreadsheet of just the different performance measurements that are used in public documents, it was pretty easy to come up with multiple reporting and disclosure requirements on 1, 3, 5, 8 and 10-year time horizons, before you even get to the different metrics that can all be called “performance” or “returns” despite measuring very different things.
That’s a lot of short-term timeframes for what is generally a decades-long investment. And it’s all before we get to net returns vs benchmarked returns, the CPI+ targets mandated in MySuper product dashboards, and the arguments about classifying growth and defensive assets, and our inability to properly communicate risk to fund members.
For absolute clarity, I’m not suggesting that there’s not a role for a range of performance measures, particularly for regulators monitoring funds. But we should seriously consider where and how information is published.
Given the number of superannuation league tables reported in major news outlets every year, it’s not hard to see why a consumer who might still be struggling with the concept of a unit price would opt out of making a choice, and many of those who do will make choices based on non-financial factors, like ease of use, great tech, round up tools, or a desire for ethical investing.
Superannuation is pretty hard for most consumers to understand, particularly those who aren’t particularly financially literate and don’t have any history in investing (I know, because I was one of them until my early 30s). But there’s only so much simpler you can make even the most basic super products. At some point, there’s always going to be a black box of some size where most consumers are out of their depth and just want to trust that their fund knows what it’s doing.
If we can do one thing right for consumers, it’s to make sure that they have an easy way to find out whether their super is working for them without having to dig too deep or wade through complex disclosures.
By providing a small number of meaningful data points, telling people what questions they might need to ask, and providing guardrails to guide good decisions we can help empower more individuals to take control of their superannuation journey.
Putting aside for a moment the rest of the Your Future, Your Super package, the ATO’s Your Super comparison tool has potential to be a game-changer here, if we get the design right.
What does that look like? As a starting point, the goal for that tool should be to provide:
- A list of high-quality MySuper products, which consumers can choose from knowing that they are likely to see good retirement outcomes whichever fund they pick;
- clear, comparable information about net returns and fees, including tailored information that takes into account a member’s age and current balance where appropriate;
- prominent information about key information not covered in the tool (like insurance) which could be an important factor in any decision and prompts to seek advice where necessary;
- Important nudges at appropriate times, like when an individual starts a new job or at tax time;
- a streamlined process to choose a fund and consolidate existing super.
This should be the single source of truth for your average consumer looking for information about their superannuation options. And it should be supported by a broader push to streamline and align other consumer-facing sources of information to reduce the conflicting messages.
There’s not just one answer to improving superannuation outcomes, and any strategy that relies on 100% engagement is doomed to fail. But we can’t do much worse than we currently are at explaining super and retirement to Australians. So giving them fewer, better metrics to grapple with when they first dip a toe in the water seems like as good a place as any to start.
OPINION PIECE - by Jane Macnamara, Senior Policy Manager – Superannuation & Retirement Incomes