Proposed changes to the superannuation system can cause concern and uncertainty for superannuation funds, particularly when those changes allow members early access to finances intended to fund retirement. SALVADOR SAIZ explores the First Home Super Saver (FHSS) scheme and flags the pros and cons for members, as well as some unintended potential opportunities for superannuation funds.
The Federal Government’s 2017 introduction of the First Home Super Saver (FHSS) scheme to tackle the nation’s crisis in home ownership affordability certainly received a frosty welcome. Some saw it as a threat, while others feared it would increase already heightened property prices. Industry concerns were further reinforced by the early release of super to combat the financial pressures from the pandemic alongside additional changes to the FHSSS in 2021.
Despite a lack of awareness and understanding, there is still substantial interest in the scheme. Our research indicates that approximately 150,000 people have searched for FHSS scheme (and associated terms) on Google. Furthermore, this has increased by 200% to around 450,000 searches since 2021 – all without active promotion of the scheme by super funds or the Government.
More importantly, these searches are coming from cohorts younger than those who typically search for super. Previously disengaged members are initiating conversations and connecting with their fund, possibly for the first time.
While most super funds have provided some information on the FHSS scheme through their website or an article, the scheme has received minimal promotion since its launch. It’s therefore, no surprise that member take-up of the scheme has been low. Through discussions with super funds and aligned industries, we’ve discovered that member understanding of the scheme can also be improved.
Putting aside the fact that early access to super goes against the purpose of the superannuation system, we believe there is a positive side to the FHSS scheme. It presents a unique opportunity to engage with and support younger members, connect them with their super and help them overcome challenges in homeownership.
In a nutshell, the scheme allows first-home buyers to make voluntary contributions of up to $15,000 per annum to their super. By applying through the ATO, they can withdraw a total of $50,000 to help them place a deposit on their first home. Given that typically a couple would be saving for a deposit, the scheme allows (if they are both first-home buyers) each person to withdraw up to $50,000 for a total deposit of $100,000.
Typically, first homebuyers tend to be from the younger cohort – often the very ones who are least engaged in their super. Suddenly, the FHSS scheme brings super front of mind to those whom retirement is almost too far away to even contemplate.
The FHSS scheme has opened the ideal opportunity for super funds to connect with these members, build rapport, and foster long-term relationships. Early engagement and seizing the chance to simultaneously provide information, insight and education, can be a very powerful tool in creating long-term affinity and brand loyalty.
Most people haven’t considered making voluntary contributions. The FHSS scheme can help change that thinking – by highlighting it and encouraging it. In effect, the FHSS scheme becomes a focused saving alternative to a regular bank account, benefiting from the tax concessions that accompany super contributions and earnings.
Members, particularly younger ones, often see voluntary contributions to super as unappealing, unnecessary, and incompatible with their lifestyle. However, the FHSS scheme is an opportunity to change that mindset and help develop positive contribution habits. The scheme provides a tangible short-term reason for members to make voluntary contributions. Members not only become familiar and comfortable with the concept of voluntary contributions, but they understand the advantage that even small contributions can make over time.
While articles are informative for some members, a more effective and engaging approach is a multi-pronged campaign, including engagement tools, eDMs, SEM and digital strategy. This ensures a focus on the holistic member journey that builds loyalty and drives conversion.
A well-designed and most importantly, easy-to-understand engagement tool is paramount in this strategy. Why? Because it demonstrates how using the FHSS scheme can substantially accelerate home deposit savings through super compared to a savings account. Depending on salary and tax bracket, deposits can be accelerated by 30% or more. Providing this useful, personalised information interactively, may present the fund in a more positive, helpful and specialist light. Younger cohorts respond to information broken down into simple, bite-sized pieces, including info graphics, video and concise copywriting.
Now, while Australians are searching for FHSS scheme tools and calculators, is a great time for funds to grow their connection with members by helping them understand the FHSS scheme and its risks and benefits.
SGY is exhibiting at the ASFA Conference in Brisbane 21-23 February. Visit us in the Super Expo.