Based on the findings of the Retirement Income Review (RIR), there is one aspect of Australia's retirement system that can't be solved with any amount of product rationalisation, performance testing or diversity of investment options: financial literacy.
According to Household, Income and Labour Dynamics in Australia (HILDA) data from last year, around 8.5 million Australian adults (or 45% of the adult population) can be considered "financially illiterate". And as per the RIR, low levels of financial literacy are correlated with a range of outcomes including:
- Lower superannuation balances
- Lower willingness to take financial risk
- Shorter savings horizons
- Lower likelihood of having a retirement plan
- Paying higher investment fees
- Insufficiently-diversified pension assets
Because of this, the RIR highlighted raising financial literacy as an important step in “[improving] engagement and retirement outcomes” across the superannuation savings pool.
How can this be achieved, though? While super funds are an obvious and accessible touchpoint for financial education services, the devil is always in the detail. People have different financial needs, goals and levels of financial literacy, and being able to engage them on their level at scale can be costly and complex.
Additionally, the RIR observed that the outcomes from financial education programs are “highly variable” and therefore, in line with recommendations from the Productivity Commission, should be designed in accordance with independently-evaluated frameworks.
Get it right, though, and the benefits to super funds are immense. Given the positive retirement outcomes associated with increased financial literacy - such as, for example, a greater number of members choosing income streams in retirement rather than lump sums - and the increased scrutiny APRA is placing on super trustees following the commencement of the Your Future, Your Super regime, there’s no better time for a fund to invest in lifting the financial literacy of its member base. Knowledge, as they say, is power.
Knowledge, as they say, is power.
Iress Education has been designed to allow super funds to easily and efficiently integrate an education program into their core member services, with a highly customisable mix of licensed and bespoke content dependent on the fund need. Developed in accordance with the G20/OECD INFE approach to financial literacy measurement across three pillars (financial knowledge, financial behaviours and attitudes to longer-term financial planning), the service aims to fast-track super fund members into making better financial decisions at every juncture.
The body of qualitative research referred to in the RIR noted that consumers generally don’t want to be educated about super specifically; instead, they want to be armed with the ability to make better decisions. And that’s exactly how our new member education suite works: super funds can tailor their mix of education material to the needs of their members, blend it with existing educational resources and deliver it in a mass-targeted way across the member experience. In doing so, we are able to place the right knowledge at the right point in time for members, helping them to make informed financial decisions - and, ultimately, improve their retirement outcomes.
We also recognise that member education and engagement is a two-way process, which is why each piece of educational material is accompanied by a single-question survey designed to address a member’s increased understanding of one of the three pillars of financial literacy mentioned above. This increase in financial literacy can then be tracked (and reported on) across the entire member base.
Just as you’ve been entrusted with delivering members the best possible retirement outcome, we’re committed to the long-term empowerment of members making better financial decisions every step of the way.
If you’re interested to learn more about how Iress’ member education could work for your fund, please contact your relationship manager or email us at contact-iresseducation@iress.com
