Clarifying the facts: choice of fund and CSIRO research on account balances

2016 is shaping up to be a year of vigorous debate around superannuation policy, and this has certainly been evident in this week’s media coverage and commentary.

While it is important that there is a robust public debate around proposed policy reforms and the future of the superannuation system, it is even more crucial that this takes place in the context of accurate information.

As such, ASFA would like to clarify its position concerning two separate inaccuracies in media reports this week:

Choice of fund
An opinion piece in today’s The Australian Financial Review (“Industry super must pick its battles and this shouldn’t be one”) incorrectly attributes a quote concerning choice of fund for individuals covered by enterprise agreements to ASFA CEO Pauline Vamos. The comment was actually made by a different industry representative. The media outlet has issued a correction online and will also do so in print tomorrow.

The quote in question does not reflect ASFA’s position in the current debate around choice of fund and enterprise agreements. ASFA’s position is outlined in this response to the Financial System Inquiry, and summarised in submissions as follows:

“While supporting the principle of choice within the superannuation system, ASFA is cognisant of specific circumstances where providing full choice may result in an impractical or costly outcome. ASFA does not support extending choice of fund to circumstances where employer contributions are made to employees who are members of defined benefit funds. ASFA also notes the complex factors which are at play in a recommendation to provide all employees with the ability to choose their own fund. Portability arrangements, while not a perfect solution, do also provide the functionality for a member to move monies to the fund of their choice.”

CSIRO research on superannuation account balances

In The Australian Financial Review yesterday, the front page story (“Richer on death than retirement”) claimed that, according to recent research undertaken by the CSIRO, Australians are richer at death than at the point of retirement.

There are a range of fundamental issues with regard to the validity of such an assessment, including:

• while median account balance averages for those with superannuation may not decline much with age after retirement, many people, particularly with APRA fund accounts, drop out of the average figures as they close their account
• less than 10 per cent of Australians aged 85 and over still have superannuation, so much of that age group have drawn down their superannuation to zero. ASFA account balance figures for each age group include those with zero balances or no superannuation, and show that the assets, on average, steadily decline with age.

It is important to note that the amount of money that most retirees are currently holding at retirement or death is far below the amount required for a comfortable level of expenditure.

Many of the current generation of retirees are practised at living within their means and have retired debt free—however, this is unlikely to be the case for future generations. These generations will require enough in superannuation to maintain a comfortable standard of expenditure, and it is important that they are not scared to spend what they need.

ASFA has been working with the government on comprehensive income stream products to assist future retirees in managing their retirement income, including dealing with the financial consequences of longevity. For such products we must ensure that they have adequate framework including governance, disclosure and advice.