Michael_BaileyYou can’t be sure of too much in life, but when the AIST, ASFA, IFSA and The Corporate Super Association all think an idea is a dog, then that idea really should be checked for fleas. The four peak bodies, so often at loggerheads with one another, produced an unprecedented joint submission to Jeremy Cooper’s Super System Review last month. They noted that when Senator Nick Sherry announced the Review in May 2009, he said its panel’s task was to “renovate the house”. The four bodies fear that with its proposal to divide members into “universal” and “choice” participants, the review in fact wants to tear the house down and start again. (I wouldn’t ask Nick Sherry about it, though – he has sooo moved on from old policy relationships.

He was asked about the Super Clearing House at a Senate Economics Committee last month, and it was as if he’d never heard of the thing – despite securing $16 million for its creation in May 2008.) The submission makes the good point that if funds were to provide a vanilla “universal” fund on top of the investment options they have already, an entire new trust structure would be required. There would also need to be a process of determining which members of the default fund really were disengaged, and which had made an active choice to be there.

The submission suggests direct consultation with members would be required, making the whole exercise even more expensive. However I thought the submission was too hasty in criticising the review panel’s suggestion that a “lifecycle” asset allocation overlay be placed on the “universal” fund. “There are serious industry misgivings on the appropriateness of lifecycle funds,” the submission says. I’d agree if we’re talking about the old-style ‘target date’ funds which got lots of US retirees into trouble. Changing asset allocation purely on the basis of the investor ’s age seems dodgy. But that does not mean we should abandon the search for a lifecycle fund with more dynamic inputs, that can genuinely tackle longevity risks. I applaud QIC’s recent investment in that project. If the longevity challenge is left to annuities only, then banks and big insurers with balance sheets will become top dogs – leaving many of those four associations’ members to fight over the scraps.

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