QSuper, one of Australia’s largest superannuation funds, is challenging what success looks like in Australian superannuation and putting a member’s retirement outcome at the heart of it.
Unveiling the full design behind its flagship product QSuper Lifetime for the first time this week, the Fund has delivered a life-stage structure based not only on age, but also account balance – the first two dimensional segmentation of default members in the country.
Coupled with a starkly different approach to the traditional view on super investment strategies, QSuper is attracting international attention for customising default member investments in a way never seen before in Australia.
From the end of May 2014, all of QSuper’s 440,000 default members - representing over 80 percent of its membership – will be segmented into eight groups according to age and account balance. In an industry-first, the investment strategies for each group will be focussed on an estimated retirement outcome for that segment, taking into account the median projected retirement income (including age pension entitlements), salary and contribution rates and retirement date. This is dynamically overlaid by analysis of current and anticipated market conditions and reviewed at least twice a year.
Significantly, the assumptions on which the strategies are built are based on real member data and insights, compiled from extensive analysis of contributing and retired member transactions and behaviours, as well as over 16,000 personal member interviews conducted through the Fund’s financial advice business, QInvest1, since the mid 1990’s.
QSuper CEO and 2013 Telstra Australian Business Woman of the Year Rosemary Vilgan said while the investment strategy of QSuper Lifetime was specifically tailored to the Fund’s unique membership, the customisation in its architecture had broken new ground in the Australian super industry.
“There has been little change to the ‘one-size-fits-all’ approach to default options in this country in the last 20 years, despite significant policy changes like the increase in contribution rate from 3 percent to 9.25 percent and beyond, and the devastating effect of major market disruptions like the GFC on the retirement savings of hundreds of thousands of Australians,” Ms Vilgan said.
“With around 80 percent of Australians’ super contributions going into a default fund2, the industry has an obligation to adapt these learnings and innovate.
“At QSuper, we are breaking new ground and beginning a journey of innovation and customisation never taken before in this country.
“As well as working towards better retirement outcomes for our members, at the industry level this new approach will challenge the thinking of Australian super funds and their trustees and encourages them to find better ways to tailor investment strategies for their members.
“How this customisation is delivered and what it looks like may vary from fund to fund, but that is the point. It’s about knowing and understanding your members and their retirement needs and building an investment strategy based on this foundation.
“We have already seen some funds begin down this path by segmenting by age, and this is encouraging. What is needed now is a collective industry push to achieve greater customisation for default members, because nothing will improve retirement outcomes for Australians better than the collective thinking of trustees around the country,” she said.
Ms Vilgan said QSuper had long held the view it could do better for its default members – the members who trust the Fund to make investment decisions on their behalf – to deliver a more secure retirement outcome, based on their aspirations.
“We have invested heavily in gaining a better understanding of who our members are, what they have and what they want to achieve, and this in-depth understanding has not only led to the design of QSuper Lifetime, but fundamentally shifted our measure of success from annual returns to more secure, adequate outcomes for members.
“We know our members have relatively conservative retirement aspirations. Regardless of their preretirement salary, our members have generally expressed a desire for a comfortable retirement that enables them to travel, eat out occasionally and spoil the grandkids for example. We know as they near retirement members’ appetite for risk diminishes and their priority is on protecting their savings, not on big annual returns. And we know the majority of our members will be entitled to a part Age Pension in retirement.”
Ms Vilgan said Australian funds continue to be compared and measured by an annual return rate, which has little bearing on the retirement outcome for members and can encourage trustees to take more risk with respect to investments – resulting in greater volatility and a larger disparity in outcomes for members, depending on the timing of retirement in the market cycle.
“With the end goal of a comfortable retirement, we know the investment path needed for our members to achieve it will vary. You would not apply the same investment strategy to a 25 year old member as you would a 55 year old member. Similarly, a 55 year old member with a balance of $70,000 would require a different investment strategy to a 55 year old with a balance of $400,000, predominantly due to the impact of the Age Pension in retirement.
“QSuper Lifetime acknowledges this. It does away with the traditional, one-size-fits-all approach and automatically adjusts a member’s investment strategy, not only as they age but as their balance grows. This means we take account of how much risk we see in the investment markets and where interest rates are positioned. We have an ultimate goal of providing members with the income they need to live the lifestyle they want in retirement,” she said.
Ms Vilgan said QSuper Lifetime would continue to evolve as the Fund works to deliver greater customisation to its full suite of products and services.
“This journey will continue to unfold – what is the first step in segmenting by age and account balance will grow and improve as more dimensions are ultimately applied.
“QSuper’s long-term vision is for every member to have a financial plan in retirement that meets their needs and QSuper Lifetime is a significant step towards that outcome,” she said.
For more information, visit qsuper.qld.gov.au.
Media contact: Belinda Taylor – 07 3029 9374 or Belinda.firstname.lastname@example.org
1. QInvest Limited (ABN 35 063 511 580, AFSL and Australian Credit Licence number 238274) (QInvest) is ultimately owned by the QSuper Board (ABN 32 125 059 006) as trustee for the QSuper Fund (ABN 60 905 115 063), and is a separate legal entity which is responsible for the financial services and credit services it provides.
2. Stronger Super – Government Response to the Super System Review (Cooper Review), 16 December 2010.
Disclaimer and General Advice Warning
This information is provided by the fund administrator, QSuper Limited (ABN 50 125 248 286 AFSL 334546) which is ultimately owned by the QSuper Board (ABN 32 125 059 006) as trustee for the QSuper Fund (ABN 60 905 115 063). All products are issued by the QSuper Board as trustee for the QSuper Fund.
This information has been prepared for general purposes only without taking into account your objectives, financial situation or needs. Consider whether the product is appropriate for you and read the PDS before making a decision. You can obtain the PDS from our website at qsuper.qld.gov.au or by calling us on 1300 360 750. Where the term ‘QSuper’ is used it represents the QSuper Board, the QSuper Fund or QSuper Limited (as applicable), unless the context indicates otherwise.
© QSuper Board of Trustees 2014.