Last month I had the opportunity to attend the UK Pension and Lifetime Savings Association (PLSA) Conference in Manchester and discuss Australia’s superannuation system with our global counterparts.

Perhaps unsurprisingly, we are facing similar challenges as we develop our respective pension systems. Improving the post-retirement phase, increasing member engagement, responding to regulatory change and transitioning to a defined contribution system were issues that featured prominently at PLSA.

On the latter issue, we are well advanced when compared with other global systems, as our transition to a compulsory defined contribution occurred much sooner. We are not constrained by the long tail of defined benefit liabilities or public expectations of overly generous state pensions.

The fundamental bedrock of our system is that it has been built upon the principle of individual self-sufficiency – Australian’s providing for their own retirement, supported by appropriate retirement income policy.

Central to that supporting policy is a compulsory, defined contribution system design. This underpins sustainability, with the projected fiscal cost of delivering the retirement outcomes Australians’ aspire to remaining relatively low and steady over time. Coverage gaps in terms of the self-employed and gig economy workers need to be addressed but most Australians can achieve a decent retirement through superannuation.

During the PLSA Conference, I was struck by the esteem in which the Australian system is held by global pension industry leaders. They universally regard us as a benchmark and an excellent example to follow as they look to progress their own.

Yet how can it be that locally, our system has so many detractors, despite all evidence to the contrary? Others want to emulate us, yet we find ourselves in a deep malaise that is proving difficult to shake. Perhaps this is, in part, due to a conceptual misunderstanding of the promise to members conferred by a defined contribution system.

An inescapable attribute of a defined contribution system design is that investment returns cannot be guaranteed and will vary depending on the underlying investments contained in funds’ portfolios.

In this regard the promise of a defined contribution system is a weak one, as individuals are subject to the vagaries and short-term uncertainty characteristic of investment markets.

However, this should not be viewed with trepidation or as a problem to fix, given superannuation’s investment horizon. Over the long-term, system performance is enhanced as the stewards of retirement capital—be they trustees, internal investment teams or external fund managers—seek to deliver the best possible risk-adjusted returns.

Competition between these participants leads to high performing funds, translating to a high performing system, as evidenced in Australia, where we have consistently outperformed the majority of other private pension systems in the OECD. Over the last 15 years, Australia ranks second only to Canada on average returns net of investment fees.

However, there can be no guarantee of an investment outcome for members. Indeed, ASIC requires that the first warning we give to individual superannuation members is that past performance is not an indicator of future performance.

The future investment performance of any superannuation fund is, quite simply, unknowable. Trustees, investment teams and regulators do not have a crystal ball. The only reasonable and rational promise to make is that funds manage savings as a fiduciary, professionally, with a strong governance and decisioning framework, that gives the best possible chance of achieving the desired returns over the long-term.

There comes a tipping point where regulatory interference detracts from, rather than enhances, member outcomes. Regulation that impedes the realisation of long-term investment strategies or that precipitates a shift in the level of risk in superannuation investment portfolios, one way or the other, is likely to be damaging to success over the longer term.

We should understand and must accept the investment market fundamentals that underlie superannuation. The uncomfortable but unchangeable reality is that chance and uncertainty are natural elements in this eco-system. This cannot be mitigated by regulation – seeking to do so offers placebo as panacea.

As we head into the ASFA Conference, we look forward to a vigorous debate on a range of issues with all stakeholders in the system. This year’s Conference will focus on five key areas impacting our industry – culture, customer, compliance, competition and change. An outstanding line-up of high calibre local and international experts and thought leaders will explore these themes, and prompt frank and meaningful discussion to help us pave the way for a better retirement system.

The Conference will provide a wonderful opportunity to engage with colleagues and reflect on our successes and achievements, and inspire us with a sense of optimism to face the challenges ahead, as we learn and grow over three fantastic days.

I look forward to seeing you in Melbourne.