How super funds can use big data to really know and engage members
Australia’s super system may be one of the largest in the world but it only partially funds retirees’ real world spend. It takes big data to reveal what’s hidden.
The new Milliman Retirement Expectations and Spending Profiles (ESP) report paints an accurate portrait of Australia’s retirees by incorporating real-life data from several sources, including the behaviour of more than 300,000 retirees.
It consigns heroic estimates and assumptions to the past and has deep implications for product development, member services and advice.
The industry can now know exactly how much retirees are spending, what they are spending money on and how it changes over time, how it is affected by which state retirees live in (and whether it is a city or rural area), and whether they own their home or rent.
Retirement savings goals: scare campaigns or reality?
Take the definition of a comfortable retirement. It’s a complex, personal issue affected by several variables such as lifespan, personal expectations, and market performance.
Many figures are floated about: some even suggest that $1 million may not be enough for one person to retire comfortably. Cue member disengagement.
Milliman’s quarterly Retirement ESP reveals a different picture. It shows that Australians aged 65 to 69 spend a median of just $31,068 a year.
To fund this expenditure with 75% certainty would require a superannuation balance of just $129,620 invested in a balanced fund. This also includes the substantial contribution of the Age Pension (set at a maximum of $20,745 a year), which funds a substantial portion of retirement income.
This isn’t to say that $129,620 should be a goal – it shows that even small differences in savings can have a hugely positive impact on members’ actual retirement lifestyles.
It’s time to forget about the $1 million scare stories now that funds can use these insights to benchmark their members against the broader community and then, most importantly, genuinely engage them.
Better data, more engagement
This information about the median annual expenditure of Australians aged 65 to 69 is significant, but it just scratches the surface of what the quarterly Milliman ESP can reveal.
Funds will no longer be forced to make decisions predominantly guided by members’ estimated risk tolerance and age. Big data and in-depth analysis can radically overhaul that approach and create better and more tailored retirement solutions, which ultimately help retain members and attract new ones.
The ESP has been developed in conjunction with the Financial Planning Association, the SMSF Association and SuperRatings.
If you'd like more details, contact Kevin Moloney at [email protected].