How Aware Super’s Retirement Manager helps you plan your retirement income

Robert Barnes

Hi, I’m Robert from SuperGuide. Today we’re getting a walkthrough of Aware Super’s new Retirement Manager tool, which is currently only available to Aware Super members. Retirement Manager is designed to help answer two of the biggest questions in retirement: how much can I spend and will my money last? Joining us today are Peter Hogg and Steve Bull from Aware Super. Welcome, Peter and Steve.

Peter Hogg

Hi, Rob, how are you?

Robert Barnes

Before we look at the tool, it would be great to understand a little bit about how your members are currently using it.

Peter Hogg

This is a tool particularly designed for those that are entering that retirement phase of life or those that are already in the retirement phase. So those members that are at those stages of life are starting to engage with the tool and use it to answer, as you say, those two big questions, you know, how long will my income last and how do I maximise that income into retirement. And we did some research last year and there’s some really telling stats that came out of that. As you can see here, 88% of Australians are worried about their retirement savings running out. 63% told us they didn’t think their super would be enough to support them throughout their retirement. 77% don’t know they can retire with their super fund while still growing their savings throughout retirement, which is really interesting. And then 51% of retirees actually go to this really safe, conservative place where they draw the minimum because they are concerned about running out of funds. And so with all that information, you know, it really helped us as we were building out our digital advice tool for retirement, being Retirement Manager, to try and answer some of these questions and give our members confidence about navigating this really complex part of life, being that transition into retirement.

So Steve Bull, who’s really the architect of this tool, is going to take us through a bit of a demo and we’ll share some sort of interesting parts of it. So Steve, over to you.

Steve Bull

Thanks, Pete. Yeah, so I’m in Retirement Manager now and as a member, a member would access Retirement Manager through their online account, through their— either through their web browser, through Member Online, or through their mobile app. And when they get in here, it sort of starts with a bit of a fact-finding session to understand a few facts about them. You’ll see it’s sort of a 4-step process. So the ‘About Today’ where we understand about the member’s current situation, the lifestyle, so the retirement lifestyle that they’re seeking, and then they can get in and play around and personalise it and then get a summary at the end. And so here I’ve set up a situation, a scenario here where this member is 67 years old, they’ve got about $320,000 in super, and they’ve got their full transfer balance cap available. So the member gets served with two potential paths that they can go down. The advanced journey, which is the default, which takes into account all of their personal information like their partner, their home ownership status, any other assets they have, and it helps us really form a picture of what sort of retirement income the member can have, including things like Age Pension, or if the member’s just after an understanding of how much they can safely draw from their super without worrying about anything else, there’s an Essentials journey that allows them to go down the sort of a quicker path.

After the member’s chosen the Advanced journey in this case, then we ask them a little bit more information. And so here we’re asking them their their salary before retirement. They can enter any other super funds they have or other account-based pensions, and they can let us know if they’re already receiving Age Pension. They can also enter some information about their partner, and this is really important for particularly for Age Pension calculations so that we know that the, the member’s part of a, part of a couple and can calculate Age Pension appropriately. So we ask for the partner’s age, their current super balance, if they have an account-based pension, if they’re still working they can enter that and have the partner retiring at a later date, and if they’re not still working, what was their pre-retirement salary. And then also the partner’s— any other income the partner might be receiving. Home ownership is really important for Age Pension. And then if the member still does have a mortgage at retirement, they can enter that and they can use their super to pay that off if that’s part of their goal. We then collect some information on the other assets.

So we’ve got the personal and lifestyle assets, which is used for Centrelink— I think Centrelink talk about a $10,000 disposal value as their default, but also you need to account for things like cars, boats, caravans. So we have a default of $50,000 that the member can override. Any savings they might have and whether they’re going to use those savings to help fund their retirement. Any personal loans that they might have that they might want to pay off. And then investment properties. And shares, managed funds. And here this member’s got a small share portfolio. The member’s receiving other income, like they’re doing a little bit of part-time work or they’ve got some income from other sources, they can enter that here as well. So fairly comprehensive fact-find, but done in a way that it’s not overwhelming. You can get through it fairly quickly.

Peter Hogg

And there’s a couple of really good tooltips in there just with sort of little education points or did you know type questions, which we know are really effective in helping members sort of work through those steps, particularly those questions that might be a bit tricky around, you know, disposal value of assets and those things that Steve spoke to. So we knew that was really important in the design.

Steve Bull

That’s right. And then you’ll see up the top right here, we’ve got this Speak to an Expert button, which allows the member to book an appointment with an adviser. So if they ever do get stuck and need some more help, there’s an easy exit for them to to book an appointment with one of our guidance advisors to help walk them through this journey. All right, there’s the second step now, the lifestyle step. This is where things really start coming to life. So all that information that the member’s provided in the first couple of steps there is now helping turn that into what a retirement lifestyle might look like for this member. And what we have here is a few different lifestyle goals, and this depends on what’s important to that person. Maximise to last is our sort of safe income level that we say this is— if you aim for this sort of income in retirement, this is a level of income that you’ll have really high confidence of achieving right through your retirement. And this includes income from the Member Super, age pension, other assets, etc. It all sort of rolls up into this number.

Some members, though, they might have a pre-retirement income that they want to continue, and so in the first step we ask for the member’s pre-retirement income, and what we then do is transfer that into our post-retirement income. So there’s some pretty complex calculations happening in the background that look at, um, you know, salary pre-retirement and translating that into an income post-retirement. And for, for this member, that $93,000 will meet what they’re currently used to earning. Of course, some people have a number in mind, and yes, so you might think you want, um, $2,000 a week, um, and you can enter that and and see how that comes to life. And you’ll see below as I’m doing this, the income confidence score is changing. So what the income confidence score is, is some really complex maths that turns those complex maths into a simple-to-understand score. So it looks at things like really strong investment markets, really weak investment markets, all the different things that can play out and translates that into a score. Like all scores, generally, unless you’re a golfer, the higher the better. And so that’s where our maximise to last, that really gives members strong confidence.

You see it’s not 100, that’s because there are those unforeseen situations that could happen where markets go into turmoil for an extended period of time. So it’s unlikely to be 100, but what we say is anything over 90 is really, really strong, and that’s a number to aim for. So this Income Confidence Score comes right through the journey.

Robert Barnes

I mean, I saw it’s color-coded as well, and once it slips below, I guess, 80-ish, then it goes into more of an amber colour. Is there a particular range that people are— your members are most comfortable with? Are they looking for 90%? Is 75% okay? Have you got any kind of insights into that?

Steve Bull

Yeah, by far the most popular income goal is that maximise to last. People are getting that confidence that that’s the number that’s sustainable and that generally always lands in that 90 to 100. What we say to people is if you’re 90 to 100, you’ve got really high confidence. If you’re in that 75 to 90 range, then your super is probably going to cover most of your retirement, but you may have to think about your spending, particularly in the latter years, and you should come back and review it more regularly. But obviously, once you start getting into the amber and red colours, that’s where we really say to people, oh, you might, you might really need to consider your spending in retirement here. One other income goal that is available is the mandated minimum, which is the government’s minimum pension requirements. And you’ll see— you’ll remember in those slides that Pete went through at the start of this presentation, around 50% of people draw the minimum. But we know that most of them, well, pretty much all of them, can live a better retirement. And so what we We’re trying to help people get confidence to draw more, so we’re sort of telling them here that, hey, you can draw this minimum, but you’re still going to have a fair bit of super left at age 95.

Now, that might be okay for some people depending on their retirement goals and if they want to leave some money behind, but for those that are looking at using their super to really live the best retirement, that Maximise to Last is, is going to give them that best result. And we’ve got a lot of education built through this, so videos that help explain certain concepts. Like, for example, age 95 is our default planning horizon. A lot of people baulk at that, but there’s actually some, some strong science that backs up that number. That can be changed in the next step if a member wants to reduce that, but we give some of the information here about why why we’ve chosen that as our default. And you’ll see there’s education built right through this journey to help people with those decisions. We’ll move to the results now. And this is where things really do come to life and where we encourage members to start playing around and going, well, what— playing with some what-if scenarios to really understand what their retirement will look like. You’ll see here the results. First thing on the left is that $82,000 that we said the member can safely live on.

What’s that actually made up of? And so it’s a combination of super, Age Pension, and other income from investments. We’re also letting members know here that there’s some real tangible benefits of commencing an income stream. Firstly, there’s the tax savings by moving from the 15% tax on earnings in the pre-retirement to the 0% tax in the post-retirement. And Aware also has a retirement bonus that we offer our members who are converting to a retirement income account, and this member is eligible for that. Obviously, we’ve spoken about the confidence score, and that’s really front and centre here as well. The other thing that’s really important is for a huge percentage of our members, I think around 70% of members receive some sort of Age Pension after age 67. And here we’re telling them if they’re eligible, if they’re not eligible, when will they be eligible, and what are the other benefits that they’re entitled to receive. We’ve got a huge amount of content around Age Pension. We’ve got an Age Pension hub that gives lots of, lots of education to support members in Age Pension. And so we, we really bring a lot of this through here with information on how to, how to access Age Pension, how to get the most out of it, and links off to our Age Pension guides and all of that sort of content.

So lots of education there to help members. The other thing that is important to some people is the charts. So, you know, how does this look throughout your retirement? And so the income charts here that breaks down the income into the different components of Age Pension, Retirement Income Account, and other income, and then the balance over time. Now, all of these numbers have been brought back to today’s dollars, so there’s no need to worry about inflation. The inflation is already factored into this. So this is how much you can live on in today’s dollars. So that’s the sort of core of the results, but now we invite members to have a play around. And so we’ve got a few different things that the members can play with. The first is the income goal that they’ve already sort of set on the first step, but you can go in and you can see what if I picked one of those other income goals. How does that impact things? We also surface here a thing called Life Stages Income Goal, which some members— well, a lot of people go through retirement in a few phases, where that first phase is where you’re really ticking off the bucket list items, spending a lot more.

And then as you go through retirement, that income need drops. And so you’re allowed— you’re able to model that here. And so we could say What if I started on, say, $95,000 and I want to reduce it by 10% each life stage? We’ve got some predefined life stages here, and you can then go and see what’s the impact of that. And that member’s getting a score of 89, which is pretty good, and they can then see how that will look over their retirement. So this, their super here is lasting till about 86, 87. If they’re a bit concerned about that latter years, they might drop it back a little bit and they can see here, oh, their super is going to last right through and then 100% confidence with that one. The other things that they can do is set a one-off goal and this is really important for a lot of our members to go, you know, especially when they retire, like what if I do that big holiday or that big renovation what’s going to be the impact of that to my retirement? And quite often the impact’s lower than you would expect because you’ve often got some Centrelink that acts as a bit of a buffer if you take some money out.

So if we go and do our $50,000 holiday, you can see that’s had a really small impact on on retirement income. It went from $82,800 to $81,100. So, um, so what more excuse do you need? That’s right. That’s right. Yeah. So yeah, really, really starts giving confidence in, you know, in, in what, what those sort of things look like. Investment strategy is obviously a really important part of retirement planning. Um, what we do as part of this journey is we default members into our, um, our trustee default, which is the conservative balanced option. About 70% of our members choose that in retirement, but we do have a whole range of investment options that are available. We allow a member to go and pick a different option, or they can go through and do a risk assessment and get a recommendation for an investment that meets their investment risk profile. So that’s available to them. I won’t go through these other ones in detail, but they— some members want to do a contribution at the start of retirement. They can facilitate that and see the impacts of that. They can also, you know, it also supports flexibility of how a member wants to retire.

So some people retire and they might want to keep doing a bit of part-time work, and so they want to keep their super fund open. Well, they can choose to do that as part of this journey and they can retain some money in their super funds so that they can keep using that. So heaps of flexibility built into this. You’ll see here this member’s got some life insurance and so we’re just asking them, just letting them know, ah, you’re actually going to lose your life insurance, you know, if you’re 67 and retiring. Probably don’t have the need for it anymore. But if you do have a need for that life insurance, just letting them know that they can— they are going to lose that, and if they don’t want to, they should keep their super fund open to retain that. And the final thing is the target income end age. It’s 95, but it can be changed. So, for example, if we make it 85, then you can live live off more, but obviously your super is going to be running out at age 85 here. So, yeah, sort of recommend keeping it to the default unless you have a real need to change it.

So as you can see, there’s a lot of things on this step that the member is able to play with and really work out what their retirement’s like. It’s probably different to a lot of traditional financial planning processes where, you know, this is helping the member understand what their goals might be. You know, that overseas holiday might have been a dream, but you can go in here and actually turn it into one of your goals and see how tangible that is.

Peter Hogg

Yeah, and been an adviser now for over 20 years, which sounds like a long time, it really does change that advice process. It’s sort of in real time, a member can, you know, maybe get home after a rough week at work and go, actually, I’m pretty ready for retirement here. And they can real time see the impact of different decisions, different income levels, and that can be played back to them, as I said, as they’re pressing the button, which is different to a traditional advice process where, you know, that can take weeks and/or months to sort of go through that full process. And so we’re really excited about giving members access to this sort of information.

Robert Barnes

And you mentioned that members can then get in touch with an Aware Super advisor. What are the typical scenarios where they might do that, that perhaps this tool doesn’t cover?

Peter Hogg

Yeah, it’s interesting. What we’re finding, obviously it’s fairly new for our members, and as Steve mentioned, there’s a lot of functionality within the tool. So we’ve got some members that, you know, maybe the tool covers their advice needs, but they just want to talk with someone about that to make sure they’re thinking about it the right way and they’re working through the process. And we see quite a bit of that where members are saying, yep, I just want to chat to someone about this. It looks good, but I just want to be sure, which makes a whole lot of sense when you’re making a big decision. But certainly where you’re looking for sort of more detailed advice, maybe for your partner where they might have, you know, their super sitting with another super fund and they sort of want to dig into more options, or there’s sort of more complex type non-super investments they’re thinking about, sale of other assets, that sort of advice sort of requires a more detailed assessment and that sort of advisor to be in the loop of that. So certainly for those instances, you know, we’ve got an advice team that can support members through that as well.

But it’s a bit of a mix, you know, some are using it just to validate and they want to talk to an adviser about that and use the tool with the adviser, and some have sort of more complex needs. And of course, you know, whilst this caters for a whole lot of our members and a really big chunk of our membership base, there will be some that just have more complex needs, and that’s where a more traditional advice process will support that.

Robert Barnes

So yeah, I mean, it looks fantastic. It’d be great to understand how, you know, how members are kind of actioning their retirement plan. What are they doing after this, and how does it interact with starting a pension and all of those tasks?

Peter Hogg

Well, we’re learning a lot, and what we found really interesting is sort of tracking the members that use the tool and what they go on to do. And we know that when they engage with one of our guidance team for that sort of validation process, you know, the bulk of those members are then going on to implement that advice and, you know, start a pension off the back of that. And that sort of makes sense. They’ve had a bit of a self-serve go themselves. They’ve gone, yeah, this is looking exciting or, you know, daunting or one of, both, and then the adviser can sort of hold their hand through to finish the implementation of that advice. Interestingly though, I think we’re up to about 17% of members who have used the tool all the way through. They’ve generated the statement advice, which Steve is showing on the screen here now, and they’re fully implementing themselves. And that’s really exciting. That tells us that for some members, this can be a complete no additional cost self-serve journey. So that’s really exciting. We’re learning more and more every day as more and more members use it. But that’s almost 1 in 5 that are sort of doing a full self-serve journey into pension phase, which is great for our members, of course.

Robert Barnes

And it’s resulting in higher income levels, isn’t it, than just the default and higher confidence levels?

Peter Hogg

Yeah, absolutely. We’re seeing, you know, the bulk of the members that are using the tool, and that’s part of sort of where we’re sort of nudging them towards that, the bulk of the members are actually choosing that maximise to last number. As I said, our research told us our members wanted more confidence in choosing the number. They also want flexibility, of course, but they want confidence to go, well, what’s the maximum I can do? How can I live the best retirement? And so it’s not a surprise really for us that more and more members are choosing that maximise to last versus defaulting to the safest, most conservative option, which means they’re really potentially leaving, you know, some on the table when it comes to retirement income, and we’re really excited by that.

Robert Barnes

Fantastic. Well, I mean, it looks really, really groundbreaking, and it’s exciting to see. I’m sure it will evolve over the years as well, and I’m sure it’ll be really useful for retirees to see how they’re tracking, and I’m sure that will give them even more confidence for the future as well.

Peter Hogg

So, you know, having seen the demo, you can see that, you know, the tool is quite powerful. It can do lots of things, particularly for those at the point of retirement, in retirement. And this is what we’ve learnt so far. So we did the full launch in November last year. This is up to mid-April. We know that, you know, it’s highly popular with these members. So 7,500 unique members have used the tool in this time. Off the back of that, Over 3,000 have generated a retirement plan at the end, so they’ve fully completed the journey. We spoke earlier around sort of who will engage an adviser versus self-serve. We’ve had over 200 appointments of requests for to see an adviser off the back of using the tool, which also says a lot of members are happy to use it in their own time and work through and learn at their own pace as well. And the satisfaction, which is obviously great to see, 8.3 out of 10. 96% of members have selected something outside of that mandated minimum, which is a really telling stat. Like, it’s a really interesting one that, you know, the, you know, more than half of the members we see today or prior to using the tool are selecting the mandated minimum.

But when they get more confidence about how much income they could draw and how that works in conjunction with the Age Pension, almost 100% are choosing something different to that. And yeah, 25% of members are taking action to select something outside that minimum and then implementing all the way through. So yeah, that’s really exciting as well, Rob.

Robert Barnes

Well, fantastic. Congratulations. It looks like such a powerful tool, so helpful to members. So I really appreciate you taking the time to share it with us today.

Steve Bull

Thanks, Rob.

Peter Hogg

Thanks, Rob.