FROM TINY ACORNS…
Indeed, providers are becoming more technologically-savvy against a backdrop of rapid innovation and the changing trend of how people want to access their money. According to Deloitte, smartphone usage in the UK is reaching a peak. Its latest UK Mobile Consumer Survey found as of mid-2016, almost half of UK adults had access to at least one type of connected entertainment product, while 4G adoption more than doubled from 25% to 54% between 2015 and 2016. In 2015, smartphones overtook laptops as UK internet users’ number one device, according to communications regulator Ofcom.
With this in mind, the future is bound to be about enabling members to view their current fund value, projected benefits, latest transactions and fund performance figures online, as well as be able to save more, at the touch of a button.
In Australia, a micro-investing initiative is being spearheaded by REST Super, the AU$39bn superannuation fund for the retail industry. The fund has entered into partnership with a company called Acorns that runs a micro-investing app, which allows members to make small, or ‘micro’, investments into their pension pot in three ways: by making direct deposits for an amount above $5; by setting up a reoccurring investment plan for a fixed amount a month such as $5 or $10; or by rounding up the spend on debit and credit cards to the nearest dollar and depositing this ‘spare change’ into their pot.
Acorns Grow Australia managing director George Lucas explains that the app enables members to be fully invested in the market from the first five dollars. This is because the legal structure enables them to hold fractional units in exchange traded funds (ETFs) provided by Blackrock, State Street, Beta Shares and Russell.
Lucas says: “It sets up a virtual spare change jar and at the end of the year you discover that you have more money [than you thought]. That is the main value proposition. We have got rid of that concept of saying, ‘This is how much you have to save to get to your goals’, and saving becomes a natural part of your spend.
“The take-up in Australia has been fantastic. We have been going 11 months and in that time we have 180,000 people signed up for the app which is quite astonishing. It is mainly millennials.”
The app also exists in the US, so could it take off in the UK? Yes, according to LGIM’s Douglas, who says the concept of micro-investing tests very well among focus groups because it encourages “frictionless saving… without really thinking about it”.
“It uses all of the behavioural finance principles which have worked so well in terms of auto-enrolment,” she adds. “You take away the pain of having to make regular investments because you just do it anyway.
“When you buy your coffee a few pennies go off into your pension account. To me, that is so much more exciting than the thought of not having a coffee now in order to be able to have a coffee in retirement.”
Douglas believes good communication around such an initiative is important, but getting the admin infrastructure right is absolutely essential. “We don’t have that in place yet, but it is definitely something we are looking at,” she adds.
