Sunsuper: Retirement savings need to grow
19 May 2016
Each year CANSTAR researches and rates account-based pensions on offer to Australians. This year we have compared 64 account based pension products from 58 providers.
In 2016 Sunsuper has achieved a 5 star rating for its Sunsuper for Life Pension product. CANSTAR caught up with a Sunsuper spokesperson for some insights into retirement challenges, customer preferences and the recent Federal Budget.
Q: The persistently low cash rate environment can make it challenging for retirees wanting yield but also security. What does a typical asset allocation look like for a Sunsuper pension holder?
A: Majority of our pension member base (80% of total member FUM) are invested across four of our investments options, Retirement (default), Balanced, Conservative and Cash. Taking a weighted average of these options we have provided a typical asset allocation below:
| Asset Class | Asset Allocation |
|---|---|
| Australian shares | 16% |
| International shares | 16% |
| Private Capital | 3% |
| Property | 8% |
| Diversified strategies | 5% |
| Infrastructure | 5% |
| Fixed interest | 25% |
| Hedge funds | 7% |
| Cash | 16% |
This shows a relatively even balance across defensive and growth assets, indicating that whilst our members consider secure returns as important, they are also conscious that their retirement savings needs to continue to grow. A common strategy for members is to invest a majority portion in a diversified investment such as the Retirement, Balance or Conservative option for growth and invest the remaining portion to the Cash option as security.
Q: Superannuation changes were announced in the recent federal budget. What impact does this have on the pension phase?
A: The four big superannuation changes in the budget (TTR tax change, the reduction in the annual concessional cap to $25,000, the ‘lifetime’ non-concessional contribution cap and the $1.6m cap in pension assets) all directly impact the pension phase.
We are concerned that these changes further reduce the ability of our older members in boosting their retirement saving via tax effective means. With our average account balance around $35,000, the main issue facing our members is one of adequacy and the changes to the contribution caps, in particular the concessional contribution cap, will have the largest impact on our members to accumulate an adequate retirement savings balance.
We expect that the introduction of the $1.6m cap on pension assets will have minimal impact on our membership, as less than 1% of our pension members have a balance of over $1.6m. We believe that the TTR (transition to retirement) changes will have limited impact on our members who are genuinely transiting into retirement.
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Q: How important for customer satisfaction and engagement is a great online experience?
A: Sunsuper has a strong view that the online experience is a core part of any service offering we have for our customers. Member research tells us online channels are members’ preferred standard communication channel. We have invested heavily in the provision of online services to our members and we are recognised as one the few funds which have a full straight-through processed pension join online portal, including full online ID verification.
Additional recent uplifts include an online rollover tool, find my member number, find an Advisor and our e-claims tool. These improvements in our service offering empower our members to do what they want when they want without having to reach out to speak to us. It may be difficult for CANSTAR to compare online services between funds, however we believe that the differences between a fully online, real time process and an online submission portal that requires manual processing behind the scenes should be recognised.
We continue to develop and improve our online capabilities with our next step to enable web chat so we can continue to have engaging conversations with our members in the online space.
Our goal is to be a customer focussed business providing options to our members, that way they choose their preferred channel. We were one of the first funds to implement digital disclosure and offer our members a fully electronic communication channel in addition to the normal paper based communication.
Investment Trend research lists website as the third-highest reason for customer satisfaction with their industry super fund. (Investment Trends 2015 Member Sentiment and Communications Report).
More and more members across all demographics begin their engagement journey with Sunsuper by first going to our website. Visits to our public web have gone up 20% YoY, MOL is up 15% and our Mobile Web service has increased 83% YoY. As online is the first point of engagement for members we work hard to optimise it ensuring we are answering their questions and allowing them to find the information they are looking for. A key part of that is allowing them to self-service.
Q: Superannuation assets exceed $2 trillion. Does the growing amount of money pose any investment challenges?
A: Yes, we certainly have to consider ensuring we have scale and efficiency in managing our members’ retirement investments. We model medium to long-term growth for the fund and plan accordingly.
We look to build our equities portfolios efficiently and with scale as much as possible with a greater mix of passive and enhanced passive management and lower exposure to high cost active management. Unlisted assets also present issues of ensuring we are able to source assets of sufficient size and to do so efficiently using our internal capability and experience. Overall each asset class have their own nuances that we must understand and take into consideration as we continue to develop our investments to match growth in assets.
Q: The Superannuation guarantee will turn 25 next year – beyond the introduction of the SG what, in your opinion, has been the most significant positive reform to superannuation over that time?
A: From a member perspective the most significant change over this time (excluding the introduction of the SG) is the change in tax treatment of superannuation for older Australians (tax free withdrawals after age 60, removing the perception of double taxation and tax free investment earnings in pension).
It should be noted however that there have been concerns raised in recent times over the ongoing sustainability and fairest of these measures. From a Fund perspective, the most significant change in recent times is the ability to provide disclosure to members electronically. This measure alone has reduced the compliance implementation costs by tens of millions of dollars per year and has improved the speed of access to disclosure documents to members.
CANSTAR congratulates Sunsuper on its Outstanding Value achievement. You can find out more about Sunsuper here.
