The Maximising superannuation capital paper, prepared by Deloitte Access Economics (DAE), found that although superannuation has been very effective in dealing with baby boomers in work, it is soon going to have to adapt to the emerging needs of this group in retirement.
“Superannuation has been very successful as an accumulation device… [However], we are about move from a phase where accumulation has been the main game into the draw down phase, and that is going to take place over the next decade or so when the boomers retire,” Professor Ian Harper, DAE partner and author of the report told an audience at an ASFA conference in Sydney.
In dealing with these changes, the system could do with an improved understanding of “longevity risk”, according to DAE.
DAE believes this probably will require the development of new, or the renewal of old products, such as deferred annuities, packages that yield a reliable income stream, and age care insurance.
The report, however, is upbeat about the system being adaptable enough to provide this and unlikely to require a strong steer from government.
“We are confident that this system we have built in this country is flexible…we are confident that will transition to see the development of products changing the system – which will help to meet the changing demands,” Mr Harper said.
ASFA chief executive Pauline Vamos told InvestorDaily the industry needs to look at how it invests its assets to ensure Australia can support an ageing population that is living longer.
“We need to look at assets that are less volatile that provide steady income streams,” Ms Vamos said. “We’re able to do that because once people are in post-retirement they can’t move in and out of their funds as much, they don’t skip between products, so we can really start looking at some of those illiquid-type investments that we’ve been wanting to look at for some time. It’s a good opportunity now.”
Constantly assessing funds about short-term performance is not the solution, she said.
“You’ve got to look at funds to be able to measure how well they are actually going to deliver to their members… that is a very different business model.”
