Why retirement needs a paradigm shift

A truly digital service will empower members

By

Dan McLaughlin

25/3/2022

Retirement, and all that it involves, needs a paradigm shift. Plain and simple. And this needs to address and bring together the three pillars of a person’s retirement.

The accusation is that for many people across the world, the retirement experience just isn’t working for them. And following the introduction of the Retirement Income Covenant, the Australian government seemingly shares this sentiment. In the lead up to and during retirement, there are many things to think about and decide. This is all hampered by a complex myriad of rules and often an opaque view of people’s assets, whether those are the Age Pension, superannuation or other savings, to name a few elements. Simply put, many people's experience of retirement fails to give them the confidence to achieve the retirement that they deserve.

And it is important to think about retirement as an experience – an experience and related service that anyone can use easily and get what they need. There is ever-growing urgency for this paradigm shift when you consider the relentless global growth in DC assets. The US, with many trillions in DC assets, leads the way by some distance. Australia, of course, is the second-largest DC market globally, with approximately AUD$1.5 trillion of benefits held in the superannuation accounts of those aged 50+. Such vast pools of assets must be viewed through the lens of this paradigm shift. Our role, as an industry, is to empower members to take control of and optimise their retirement, with systems that support saving and provide a firm foundation for them to achieve a healthy retirement. We need to do more to ensure that they don't fall at the final hurdle. 

Delivering the paradigm shift

A cornerstone for this change is through meeting the needs and expectations of members, through the design and delivery of truly digital services. The key adverb here is ‘truly’ as this has deep and lasting implications for the retirement experience at many levels. Smart is delivering this via a key platform module, Smart Retire.

If you take the three pillars, an individual, who can be rightly termed the modern retiree, is faced with a mountain to climb. But a truly digital, member-first service can assist in this complex navigation, making the retirement experience more relevant, personal and akin to a banking app or an ecommerce experience. Smart Retire, a core platform module, will be central to delivering the paradigm shift in the UK, Australia, the US and beyond.

Control and flexibility

Visibility over an individual’s finances would be a decent place to start. How can they see what they have without needing to spend endless hours on the phone and the web joining the dots? How can they more easily understand if their retirement income is broadly stable or sustainable? More than 50% of Australians prioritise online access and clear communication when choosing a retirement plan provider. It must be the case that everyone can see, through their preferred channel (whether that’s a laptop or smartphone), their assets across the three pillars – Age Pension + Superannuation + voluntary savings. A truly digital service will do this and will also exploit structural innovations, such as Consumer Data Rights (CDR) in Australia or PSD2 in Europe, to bring new and exciting ways of helping enrich members’ retirement experience.  

The truly digital service also empowers members to take action, whether that’s on their own, with guidance or with someone helping them, such as an adviser. Through modern technology and design, onerous processes are removed to enable people to put their assets to good use, making them work harder across the pillars. A decision to allocate part of a member’s super to a particular bucket, say saving for a rainy day, should automatically configure so that it does not hamper or affect their Age Pension entitlement, leading to automatically-calculated optimised outcomes. And the ‘helping them’ point here is purposeful. This guidance and advice spectrum is, in real life, a broad and personal experience. For some, it means following a trusted friend’s advice, while others will prefer to sit together, perhaps with their accountant, to make decisions. And for some, formal advice will be a good choice. A truly digital service allows for all scenarios.

Greater ownership and control over their finances across the pillars will lead to increased confidence, understanding and (importantly) a greater sense of accountability over their retirement experience – an experience that is meaningful and enjoyable for the individual. 

If you'd like to talk about how our solution, Smart Retire, can help your organisation implement the Income Covenant successfully, or to discuss any aspect of the services we offer, I’d be delighted to hear from you at [email protected] If you’d like to read more about what we do at Smart, click here.

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FOOTNOTES
CONTRIBUTORS

Why retirement needs a paradigm shift

A truly digital service will empower members

Retirement, and all that it involves, needs a paradigm shift. Plain and simple. And this needs to address and bring together the three pillars of a person’s retirement.

The accusation is that for many people across the world, the retirement experience just isn’t working for them. And following the introduction of the Retirement Income Covenant, the Australian government seemingly shares this sentiment. In the lead up to and during retirement, there are many things to think about and decide. This is all hampered by a complex myriad of rules and often an opaque view of people’s assets, whether those are the Age Pension, superannuation or other savings, to name a few elements. Simply put, many people's experience of retirement fails to give them the confidence to achieve the retirement that they deserve.

And it is important to think about retirement as an experience – an experience and related service that anyone can use easily and get what they need. There is ever-growing urgency for this paradigm shift when you consider the relentless global growth in DC assets. The US, with many trillions in DC assets, leads the way by some distance. Australia, of course, is the second-largest DC market globally, with approximately AUD$1.5 trillion of benefits held in the superannuation accounts of those aged 50+. Such vast pools of assets must be viewed through the lens of this paradigm shift. Our role, as an industry, is to empower members to take control of and optimise their retirement, with systems that support saving and provide a firm foundation for them to achieve a healthy retirement. We need to do more to ensure that they don't fall at the final hurdle. 

Delivering the paradigm shift

A cornerstone for this change is through meeting the needs and expectations of members, through the design and delivery of truly digital services. The key adverb here is ‘truly’ as this has deep and lasting implications for the retirement experience at many levels. Smart is delivering this via a key platform module, Smart Retire.

If you take the three pillars, an individual, who can be rightly termed the modern retiree, is faced with a mountain to climb. But a truly digital, member-first service can assist in this complex navigation, making the retirement experience more relevant, personal and akin to a banking app or an ecommerce experience. Smart Retire, a core platform module, will be central to delivering the paradigm shift in the UK, Australia, the US and beyond.

Control and flexibility

Visibility over an individual’s finances would be a decent place to start. How can they see what they have without needing to spend endless hours on the phone and the web joining the dots? How can they more easily understand if their retirement income is broadly stable or sustainable? More than 50% of Australians prioritise online access and clear communication when choosing a retirement plan provider. It must be the case that everyone can see, through their preferred channel (whether that’s a laptop or smartphone), their assets across the three pillars – Age Pension + Superannuation + voluntary savings. A truly digital service will do this and will also exploit structural innovations, such as Consumer Data Rights (CDR) in Australia or PSD2 in Europe, to bring new and exciting ways of helping enrich members’ retirement experience.  

The truly digital service also empowers members to take action, whether that’s on their own, with guidance or with someone helping them, such as an adviser. Through modern technology and design, onerous processes are removed to enable people to put their assets to good use, making them work harder across the pillars. A decision to allocate part of a member’s super to a particular bucket, say saving for a rainy day, should automatically configure so that it does not hamper or affect their Age Pension entitlement, leading to automatically-calculated optimised outcomes. And the ‘helping them’ point here is purposeful. This guidance and advice spectrum is, in real life, a broad and personal experience. For some, it means following a trusted friend’s advice, while others will prefer to sit together, perhaps with their accountant, to make decisions. And for some, formal advice will be a good choice. A truly digital service allows for all scenarios.

Greater ownership and control over their finances across the pillars will lead to increased confidence, understanding and (importantly) a greater sense of accountability over their retirement experience – an experience that is meaningful and enjoyable for the individual. 

If you'd like to talk about how our solution, Smart Retire, can help your organisation implement the Income Covenant successfully, or to discuss any aspect of the services we offer, I’d be delighted to hear from you at [email protected] If you’d like to read more about what we do at Smart, click here.

About Smart

Smart is a global savings and investments technology platform provider. Its mission is to transform retirement, savings and financial well-being around the world.

Smart partners with governments and financial institutions (including insurers, asset managers, banks, financial advisers) to deliver retirement savings and income solutions that are digital, bespoke and cost efficient. In addition to the UK, Smart is operating in the USA, Europe, Australia and the Middle East with more than a million savers entrusting over £4 billion in assets on the platform. 

Smart supports its clients with a 750 strong global team.

Legal & General, Fidelity International Strategic Ventures, J.P. Morgan, the Link Group, Barclays, Natixis Investment Managers, DWS Group and Chrysalis Investments are all investors in Smart.

We tweet as @SmartPensionUK.

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Email: [email protected]