The Retirement Income Covenant came into effect on 1 July 2022 and Super funds have responded in different ways. So, what now? 

CSBA CX Director of Finance, Sam Monteath, speaks to CX expert, Sam Litinsky, about how trustees can improve the effectiveness of their retirement income strategy. It’s not too late!

S Monteath: Super funds have now published their retirement income strategies. What is the quality of these strategies?

S Litinsky: From what I’ve seen in the market, the discussions I’ve had with funds, and the direct work we’ve completed with our clients, there is a wide range of responses from trustees.

I believe there is a continuum in terms of how they have responded to their obligations, ranging from a compliance-based approach, right through to a needs-based approach.

Our team at CSBA have had some interesting conversations with trustees and successfully helped them navigate this new territory in a meaningful way.

S Monteath: Are trustees inadvertently taking a compliance-based approach to their strategies?

S Litinsky: There is really a mixed bag in terms of response, detail, and focus. I feel strongly that taking the compliance-based approach is very limiting, and even risky for funds as this approach ignores the intention behind the Covenant. Our response has been to work with clients who want to embrace the Covenant’s true intent and move towards the needs-based end of the continuum.

Paramount to our work is helping trustees unpack the diverse needs of their membership. If you only peer through a single lens, you will never get the full picture. What we’ve done is designed a best-practice qualitative research methodology that has helped provide our clients with a deeper, nuanced understanding of the attitudes, needs and motivations of their members to feed into their strategies.

S Monteath: Tell me more about CSBA’s qualitative research.

S Litinsky: CSBA’s approach centres around an in-depth interview methodology. Our conversations are guided by key topic areas such as what life might look like in the next five years; financial priorities; what’s keeping them up at night; the role of Superannuation in the member’s life today, and in the future, particularly relative to other investments.

We want to understand their sentiment towards funding the type of retirement they hope for (whether that be the more extravagant yearly European vacation or as simple as having a weekly pub lunch with friends); and what I like to call “what’s the magic number?” – exploring their knowledge on what they think they need individually or as a couple to live the way they wish to in retirement…the list goes on.

Our bespoke research design approach means that for some funds, we have focused on including their end-to-end membership from accumulation to retirement in our research design. Whereas for others, we have focused on specific segment cohorts (typically those approaching and at retirement). It is very dependent on the membership, their size, industry, level of current understanding and data on their members.

S Monteath: Why is it so important to design a bespoke qualitative research program?

S Litinsky: What we found very early on from working with various trustees, is that there is no ‘one size fits all’ approach. And within memberships, there are vast differences among the member base. Without a solid, deep understanding of your membership’s needs and nuances, you are not in the best position to plan and apply different strategies at a cohort level and embrace the true intent of the retirement Covenant.

We spend a lot of time up-front working with our clients to develop a robust sampling framework that is unique to the fund.

The results from in-depth interviews are extremely rewarding. We collect a wealth of information using the power of the moderator who skilfully adapts and evolves the questions based on the conversation flow, ensuring that the discussion is member and fund focused.

It’s about delivering the best possible outcome for our clients, so they can in turn do the same for their members.

S Monteath: What are your top three tips for Super funds who want to fine-tune their retirement income strategy?

S Litinsky:

  • Tip #1: View the covenant as an opportunity rather than a requirement.
    Think about your current strategy – have you embraced the true intent of the Retirement Income Covenant?Reflect on whether you have a solid, deep understanding of your membership’s needs and nuances. And consider whether you can apply different strategies at a cohort level.
  • Tip #2: Your Retirement Income Strategy is not set in stone.
    Remember that your strategy can and must evolve over time – continue to work at developing it. Spend the time gathering those deep member-focused insights, build on them over time, work on a needs-focused cohort-based approach. It’s not too late if you want to do more.
  • Tip #3: New insights are valuable for other areas in the organisation.
    Insights garnered from a needs-based member approach are relevant beyond the Retirement Income Strategy. They add value by providing additional layers and intelligence that can be used for other programs of work.

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