Member engagement a danger to super savings

A high level of engagement with superannuation savings can lead members to make the wrong move at the wrong time, industry executives have warned.

“The joke is that often if you’re disengaged with your super, ironically it can be good,” State Street Global Advisors (SSGA) head of Investment Solutions Group for Asia Pacific Mark Wills said.

Wills also said that the problem is “when you get to 67 you don’t tend to be disengaged.”

Quoting a study by the Association of Superannuation Funds of Australia (ASFA) on super fund member behaviour during the global financial crisis, he said “in some schemes up to 50% of members either switched or inquired about switching.”

“Education, member engagement, all of that — we think it’s a waste of time,” he said, and explained that members’ real interests are retiring and having a pension.

Behavioural finance shows that “as humans, we tend to focus on overconfidence as opposed to bad parts; and the bad part is often so visceral and so dramatic that it creates all these bad behaviours.”

He said that a key issue is “how do you get people to stay the journey and understand what their money is trying to do.”

This has become a concern in the current low return environment, where members could be switching to riskier investments in a bid to increase their returns.

“The real risk now is that we’re entering a repressed return environment and people will continue to over reach.”

First State Super chief digital officer Mary Murphy also commented on super fund member engagement and said that the super industry can “get trapped by this engagement word. Engagement is about what satisfies me as a consumer.”

— via the FINANCIAL STANDARD, Aug 14