Vision Super helping members save more in Australian first
Vision Super media release
23 January 2019
Industry super fund, Vision Super, today announced their innovative ‘Save more later’ program based on behavioural economics is now helping workers at eight councils and other workplaces save more for retirement.
The program, ‘Save more later’, is based on the behavioural economics concept of ‘hyperbolic discounting’, which suggests people value their future self less than they value their current self – meaning that although they may be unwilling to save extra for retirement now, they are willing to save more for retirement in the future.
When the Federal government delayed increases in the super guarantee rate to 2021, Vision Super felt the need to act to ensure workers did not miss out on a comfortable retirement. Vision Super CEO, Stephen Rowe, said the program was several years in the making, and was designed to help workers reach a comfortable level of retirement more easily.
“Our research suggested that if you ask people to save more now, they are likely to say no, even when you give them all the information about why they need to save more to have a comfortable retirement,” he said.
“People need the money now to pay bills and put food on the table, or they’d rather have the money to spend now. But if you ask them to save money they don’t have yet – for example from a future pay rise – they’re very likely to agree.”
In 2014, armed with research and modelling that showed substantially larger retirement balances, Vision Super began talking to their default employers and to the Australian Services Union (ASU) about writing the program into their enterprise agreements with staff. The basic idea of the program is that rather than simply getting a pay rise, staff get part of their increase in their pay packet and part as an extra contribution to their super. Staff are automatically opted in to the program but can choose to opt out. Over the three years of an enterprise agreement, this can add up to a significant ongoing additional contribution.
Enterprise agreements typically run for three years and have a long negotiation period before they are signed, but both employers and the union were enthusiastic about the benefits for workers. Mount Alexander Shire Council was the first to have an enterprise agreement that included the ‘Save more later’ program approved by Fair Work Australia in October. They were followed by Buloke Shire Council, Swan Hill Rural City Council, Yarriambiack Shire Council, and Goulburn Valley Water. Loddon Shire Council and Darebin City Council have also agreed to include the program and are currently at Fair Work Australia for approval. Vision Super also has the program in place for their own staff. Another six councils are currently negotiating new agreements that include the program – Knox City Council, Yarra Ranges Council, Warrnambool City Council, Gannawarra Shire Council, Mildura Rural City Council, City of Whittlesea, and Southern Grampians Shire Council.
Swan Hill Rural City Council CEO John McLinden is enthusiastic about the benefits of the program for council employees: “The employer superannuation contribution increasing from 9.5% to 11% over three years was introduced through Swan Hill Rural City Council's Enterprise Agreement last year,” he said.
“It's widely understood that a majority of Australians will retire with insufficient superannuation. At Swan Hill Rural City Council, we're doing something to address this. And we believe these arrangements will mean that our staff will enjoy a better quality of retirement.”
Vision Super CEO Stephen Rowe said the results so far are exceptional.
“Just to give a few examples, At Mount Alexander Shire Council, the number of members making additional contributions to their super has gone up 440%. 80% of members at Swan Hill have stayed in the program, and 92% are in at Loddon Shire, with only 15 people in 200 choosing to opt out,” he said.
“As an industry fund, members are at the centre of everything we do, and it’s really gratifying to see these results, which at the end of the day mean a better retirement for our members. There are a number of other enterprise agreements currently under negotiation or in the process of being finalised that also include the ‘Save more later’ program, so we hope to see more members benefitting over time.”