Retirement income modelling needs to be publicly released

The superannuation system is in the grip of a contagious false narrative which risks undermining retirement outcomes and the government should publicly release the model of Australian retirement incomes and asset (MARIA) to help establish a single source of truth, the Association of Superannuation Funds of Australia (ASFA) believes.

Addressing the ASFA conference in Melbourne today, ASFA chief executive, Dr Martin Fahy said the retirement income review was an opportunity to move beyond the rhetorical hyperbole and dysfunctional narrative economics of retirement funding.

Fahy pointed to a book by Robert Shiller that suggested popular stories such as “spiralling inflation”, “tax and spend” and “plummeting house prices” had a contagion influence on public policy debates such as superannuation.

“If the review is to fully deliver on its aspiration to establish a single source of truth, then it should place into the public domain the all-important MARIA,” he said.

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“An open and transparent publication of the dynamic micro simulation model at the heart of the review would finally lay to rest the falsehoods that plague the superannuation debate in Australia.

“It would provide a platform for an informed evidence-based debate on the important issues of adequacy, benefit design and the impact of assumptions regarding CPI, wage growth, and capital market returns.”

Fahy said MARIA would be able to move beyond the “fractious” debate on adequacy and contribution rates and focus on:

• The challenge of creating liveable cities in the fact of growing urbanisation;
• Recalibrating the way effort is organised and rewarded in the economy;
• The issue of long-term sustainable growth; and
• The financialisaton of the economy.

He said the industry could not regulate a way to better outcomes if there was an overly “zealous focus” on short-term investment performance as it would more likely detract net performance within the system.

“The concerted effort of superannuation funds to maximise risk-adjusted returns is not an objective science. Yet through a combination process, skill and judgement the system has delivered great outcomes for members over the long-term,” Fahy said.

“Investment in private capital markets, and internationalisation of our asset allocation are key to finding the investment opportunities that we need to diversify risk and generate returns to members.”

Fahy noted that the industry would encounter headwinds and setbacks but needed to stay “the course with our aspirations and stare down those that would dismantle our superannuation system with outdated thinking”.

“We must seek to attract high grade talent to the industry. It is the ingenuity of the people in this room today that will determine the future of retirement in this country. Australians deserve the very best professional management of funds and the system at large,” he said.