Communications & Marketing

The psychology of super fund member segmentation

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Superannuation fund members are not all the same; but neither are they all entirely different.

The more a fund can understand about its members, the more it can personalise its engagement to each of their needs and preferences. The question is how to recognise relevant differences between fund members while also accounting for the practical limits to how much about its members a fund can realistically know.

One current problem is that some very useful information about members is not being used enough by some funds. The funds that fail to sufficiently personalise their member engagement should not be surprised when their members ignore their communications.

On the flipside, there are some pieces of information that can lead funds to believe they understand their members better than they actually do. Attempts at personalisation that do not match a member's actual needs and preferences do not help either.

A member's age-a good start

If there is only one piece of information available about a member that would help to understand their needs, it would be their age. For a start, it would indicate how a bunch of important rules apply to that member, such as whether they were eligible to draw a pension.

A member's age also provides a guide to their likely retirement planning and broader financial requirements by giving a clue to their remaining life expectancy, their likely remaining period of employment, and their life stage and therefore, for example, the potential for them to have family commitments and/or a mortgage.

A member's age is also useful for understanding some of the key psychological issues that are likely to be most relevant when engaging with each member cohort about their superannuation. For example, how can a fund make the idea of retirement salient for younger members for whom it is, understandably, likely to feel very distant? And how can a fund engage with elderly members when some of them might be suffering from cognitive decline?

Unfortunately, some funds do not send different communications to different age groups, even when age is clearly a relevant consideration.

This has resulted in 80-year-old members receiving fund communications about planning for retirement, when they are already retired, and to 30-year-old members being informed about the eligibility rules for contributing to superannuation in their 70s which is far from relevant for them. These funds should at least start the journey to personalisation by tailoring their communications for different age cohorts.

A member's account balance-becoming increasingly relevant

Similar to a member's age, their account balance can also be directly relevant in applying the law both for members with small accounts for whom fees might be capped, and for those with larger accounts who might approach limits on how much can be transferred into a retirement account. By segmenting based on account size, funds can communicate about these issues only to the members for whom they are relevant.

When combined with a member's age, their account balance also allows a fund to get an idea of each member's projected retirement income. Funds could use this information to compare against different measures of adequacy and to nudge those with lower projected retirement incomes to contribute more if they can, or potentially to invest more aggressively.

Of course, members with lower account balances might not be poor. They might have a second and larger superannuation account that their fund is unaware of, or an unusually large amount of non-superannuation assets.

However, with increasing consolidation, the introduction of stapling, and superannuation projected to make up a larger proportion of people's retirement wealth for younger cohorts, these problem should diminish with time.

A member's contributions history-pretty good too

As with age and account balance, a member's contributions history speaks directly to the application of different superannuation-related laws that will be relevant for some members.