A lifecycle approach and a move away from asset allocation to product allocation is vital when addressing the retirement income puzzle, according to Ibbotson Associates.
"I think a lifecycle approach and thinking about the whole journey and not just the accumulation journey, understanding the risks and moving from asset allocation to product allocation is going to be important," Ibbotson Associates chief investment officer Daniel Needham said.
"I think there needs to be more research into the retirement income part of the journey. Accumulation has been great, but the puzzle is still there and I think that's the challenge for our industry and the Australian government as well."
The retirement income system in Australia is currently too lump sum focused and geared towards accumulation, Needham said.
"If you look at our retirement income system I'd say accumulation has been fantastic, there's no doubt about it. The Keating government's SG [superannuation guarantee] has built the assets up," he said.
"Unfortunately I think when we look back in 20 years' time at some of those Labour policies I think there will be a glaring question as to why they didn't have compulsory annuitisation.
"We would be in a different place today if they'd introduced it and we will be in a different place in 20 years if they don't introduce it."
Needham added that longevity risk cannot be hedged with account based pensions.
"It's a simple fact for a certain given level of wealth. The industry needs to stop looking in the equity rear view mirror because the last 20 years of equity returns in Australia are very unlikely to be repeated," he said.
"We need to look forward and not backwards. I think we need to save for real income versus time weighted returns.
"The whole industry measures everything on time weighted returns when you're actually de-cumulating assets it doesn't matter, well it doesn't matter as much dollar weighted returns do."
