Super system will deliver but needs future-proofing

The Australian superannuation system is robust enough to provide stability for retirees but needs to adapt to the shift in retirees drawing down on the pool of assets already accumulated, according to a report commissioned by the Association of Superannuation Funds of Australia (ASFA) and released earlier today. 

The report noted this pool of super assets was also important in adding stability to the Australian economy during the global financial crisis. 

ASFA chief executive Pauline Vamos said the pool “provided ballast for the Australian economy during the GFC” but needed to be repositioned to ensure ongoing economic stability. 

“The $1.5 trillion pool of superannuation is growing rapidly, but its inherent flexibility as confirmed by the report means it poses no real threat to the stability of the financial system and in fact may actually help drive economic growth in Australia now and for decades to come,” Vamos said. 

The size of the pool and its management was also mentioned in the report, which found the super system was able to deliver retirement incomes consistent with the best in the world and the expectations of retirees, due to the way funds were invested. 

However super funds would need to reassess their business models to deal with the growing number of superannuants moving from accumulation to draw-down phase by changing investment strategies to ensure super funds have the appropriate assets to provide income streams. 

“For many years the majority of super accounts have been in the accumulation phase, so super funds have tailored their investment strategies accordingly. However, as the population ages and more and more people move into retirement, the focus will need to shift to acquiring assets which deliver the funds necessary to provide for members drawing an income stream,” Vamos said. 

The report said this shift in strategies should, however, be part of a greater discussion regarding superannuation policy that needed to take place within the superannuation industry and the wider community. 

Vamos said the wider demographic changes in society would lead to investment strategy changes as well as policy changes, but what these would still be open to discussion. In response to this, ASFA has released a white paper seeking community consultation on changes to the design of the superannuation system. 

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