Will you be renting in retirement?

Money and Life
(Financial Planning Association of Australia)

For some people, super may be the most valuable asset they’ll ever have. So it makes sense to know how much they have and how it’s invested. But it’s very often the case that young people, in particular, see super as being something that’s of low concern. So how can the super industry get young people interested in something they won’t benefit from for years to come?

With home ownership rates falling, particularly among younger people, the super stakes are getting higher. Current annual estimates for living costs in retirement – called the retirement standard – assume you’ll be living rent and mortgage-free in your own home by the time you leave work. However, this owner-occupier status in retirement is becoming less common, causing concern about whether people in retirement will have enough income to live on.

Super hurdles to overcome

But these trends and their consequences aren’t really on the radar for younger generations. Millenials and Gen X are struggling with uncertainty about their immediate future as they stare down the barrel of Industry 4.0, feeling unprepared and under threat of becoming obsolete. According to results from the Deloitte Millenial Survey 2018, only 36% of Millenials and 29% of Gen Xers believe they have what it takes[1] to succeed in the workplace once the next level of technology and automation takes hold.

So it’s no wonder messages to young people about the importance of super aren’t leading to action. Being told super is an all-important asset holds no interest for them, nor does the allure of compound interest as the secret weapon of young super savers. Into this arena of millennial anxiety steps Zuper, a brand new super fund launching in July 2018. CEO Jessica Ellerm, CPO Jon Holloway, and Founder and Chief Creative Officer Eran Thomson are part of a team determined to break the disengagement deadlock that’s keeping young people from taking control of their super.

Where the industry is coming from

Having moved to Australia from the USA 16 years ago, Eran was mystified by super guarantee contributions appearing on his pay advice. “I didn’t pay much attention to those figures and no one explained it to me” says Eran. “Years later I got my first communication from my super fund and it was a letter announcing my account would be closing as it no longer had money in it. Insurance and management fees eroded the whole balance. I’ve learnt since that experiences like mine are all too common. And that’s one of many reasons why I’m passionate about getting more people to know about their super, and use it to realise their vision of a better future.”

Jessica is happy to see recent proposals made in the Federal Budget to remedy this disappearing super phenomenon. “It’s definitely a positive based on the right thinking, which is to stop inactive funds from leaking away into nothing,” says Jessica. “But this move raises the question of why funds weren’t doing more to address this. Super fund trustees should be acting in members’ best interests and when the government has to step in, it highlights the fact that funds are not on the front foot when it comes to changing things for the better, especially for young people.”

This disconnect between funds and their members can also lead to super being seen more as a burden than a benefit. “For many young people, super has that grudge factor – money they’re paid, but can’t control and get nothing from,” says Jessica. “The super industry has a tendency to keep their distance, which breeds apathy and disengagement. So it’s no wonder super is getting the least amount of attention from people who it’s really going to matter to, and not only when they retire.”

Making super matter now

During the two years it’s taken to set up Zuper, Eran, Jessica, Jon and their team have learnt a great deal about why young people aren’t super-savvy and how the industry needs to change. But how can they use their knowledge to ignite the super conversation with potential Zuper members? “It’s about how we communicate, both in our language and what we focus on,” says Jessica. “Early on we identified the importance of our role as a translator of finance jargon. The super industry focus much of their communication on compliance and product information and it’s not the sort of language or content that makes people feel safe and comfortable, let alone engaged.”

The major conversational shift, according to Jessica, should be towards what matters to young people and often that’s their career and what’s going on the world. “The Zuper is more immediate,” says Jessica. “We bring it forward to what you can do with your super here and now, whether it’s currently invested in companies you care about. Making those choices is actually building the future you’re going to be living in and retiring into. And we’re not coming to them with all the answers. Instead, we throw questions out to the crowd so members can benefit from collective wisdom and own decisions they’re making about super and the society they want to belong to.”

Turning the super discussion into a broader one about wealth and opportunity is another approach Zuper are taking. By addressing concerns about having 21st century skills for success in their career, Zuper are drawing young people in and changing their mindset around super, and saving in general. “There are other things to think about saving for, such as upskilling for your next career move,” says Jessica. “Super is the cornerstone, but we put a big emphasis on investing in your earning potential. Not only will it pay off for your take home pay, but for your super too, as you organically save more through the super guarantee once your salary increases.”

Getting future fund members to think of super as just one of their options for saving and investing means financial education is something Zuper will be offering, through events such as their Fin Gym and Super School sessions. If you’re keen to get a handle on where super sits with your other personal and financial goals, a CERTIFIED FINANCIAL PLANNER® professional can help you look at the whole picture, as well as the detail, and help you come up with a strategy that works.

Thinking about your super options? Find out more about what’s out there in the super universe and some tips to help you get your super working for you.

[1] Deloitte Millenial Survey 2018, ‘Millennials and Gen Z recognize the current and future importance of Industry 4.0, yet many feel unprepared for the changes it will bring. Fewer than four in 10 millennials (36 percent) and three in 10 Gen Z currently in work (29 percent) believe they have the skills and knowledge they’ll need to thrive.’https://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html


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