It can be an interesting experience to ask members about the level of income they would like to have in retirement and compare that to how much they are realistically likely to receive based on their current super savings.

Most members have highly unrealistic (optimistic) expectations about the level of income their super will provide them with in retirement.

One solution to help manage this expectations problem is to provide members with a printed personalised forecast of how much income they are likely to receive in retirement (and bundle this with their annual benefit statement).

While many funds provide members with excellent online calculator tools to help members understand their likely future, the reality is that the engagement with these tools is less than ideal. Members have to seek the tools out and often not enough do so. 

“Pushing” personalised forecasts to members is likely to have a much greater reach (overcoming member inertia to use tools or seek advice).

From a fund perspective, issuing such projections can have the following benefits:

• Encourage additional contribution (to build funds under management);
• Compliment and enhance engagement with online tools (such as calculators)
• Encourage members to utilise your financial planning service (if you have one)
• Differentiate your service offering from competitors.

However at the moment, to provide such a forecast is considered personal financial advice under Corporations Law which means that the full palaver of statements of advice and fact finding is required. Clearly this is impractical for funds with many thousands of members.

ASIC has recently released its Regulatory Guide on Intrafund advice. We understand that in the coming months it will also be releasing further guidance which would allow funds to provide members with personalised forecasts without the need to adhere to the advice provisions. This follows a consultation process with the industry late last year. One likely outcome is that a standard set of core assumptions will be required.

Funds should consider preparing for these changes by implementing the following actions:

• Integrate into your 2010 business plans an initiative to introduce printed personalised forecasts on member statements
• Consider how this initiative fits in with your overall communication and member education strategy
• Conduct a detailed review of your online calculators tools to ensure they  will produce results consistent with the benefit projections on members personalised statements.

Mercer has committed significant resources to address this issue and has successfully developed a personalised forecasting engine which can integrate member information from an administration platform. The forecasting engine can be used either as an interactive online retirement calculator or to produce printed personalised forecasts on member statements, ensuring consistency between the two communication mediums.

For more information about the printed forecasts or online tools contact Darren Wickham.

A snapshot of Mercer’s Retirement Calculator