Vision Super recently announced their ‘Save more later’ program, using behavioural economics to try to help people save more for retirement.
The concept is based on the idea of the hyperbolic discounting model, where people value their future self less than their current self. We may not want to save for retirement now, but we are willing to save more for retirement in the future.
The program has been in development for several years, to help workers have a more comfortable retirement. Asking people to save money they don’t have yet - a future pay rise, for example - is much easier for people to agree to, since the extra income is in the future, and so are the savings.
The idea is that instead of getting a pay rise, the system is inbuilt into enterprise agreements whereby staff get part of their pay increase in their regular pay, but a portion is put directly into their superannuation as a voluntary contribution. Staff are automatically opted into the program, but can choose to leave anytime.
Enterprise agreements run for about three years, with a long negotiation period prior to signing, but discussions with employers and unions have been very positive. The first council to implement this system was Mount Alexander Shire Council. The system has been approved by Fair Work Australia, and takes the contribution from 9.5 per cent to 11 per cent over three years.
Other councils participating are:
Buloke Shire Council
Swan Hill Rural City Council
Yarriambiack Shire Council
Goulburn Valley Water.
Loddon Shire Council (under review)
Darebin City Council (under review)
Seven other councils are negotiating new agreements that include the program