Under a Government-run scheme, the Future Fund can manage the assets and Centrelink administer the payments. “The infrastructure exists, and that’s why the super industry should watch its step,” Evans says. Just as the Government makes it compulsory for people to save for their retirements, it should be compulsory to buy a deferred annuity of a certain size upon retirement. If members have money left over, they can spend it as they please. He says that in 10 years, the average couple will have up to $800,000 in savings at retirement. Forcing them to buy a deferred annuity will prevent much of this “going up against the wall”. Also speaking at the conference, Martin Stevenson, global partner at Mercer, made a similar call to Cooper’s – albeit in a more subtle manner – by saying that Australia scored zero out of 10 for not requiring that retirees transfer at least some of their super lump sum into a deferred income stream.

“The Government will have to bite the bullet and mandate an income stream” in post-retirement, said Stevenson, referring to the Melbourne Mercer Global Pension Index on which Australia’s superannuation system scored fourth place worldwide – but with “serious weaknesses”. Input from the Treasury was crucial, said David Heine, Cuscal’s general manager product and operations. He said the superannuation industry must work with the Federal Treasury, but the industry could not wait for politicians and so it had to explore some kind of convergence between insurance and superannuation. Developing this idea, Towers Watson principal Nick Callil floated the idea that “if the Government issued annuities, [then] it should set up a proper life office”. But, he added quickly that “the arguments against this outweighed the arguments for it”. Callil warned – in a theme that became common during the conference – that the industry must not wait for the Government to set the standards. “We buy life insurance against dying too soon,” he said.

“There must be a mindset change so people insure against living too long” and exhausting their savings. Milliman’s practice leader, Wade Matterson, echoed Callil’s concerns with a call for the industry to consider some kind of superannuation-insurance hybrid to address the burgeoning problems of longevity and outliving savings. The counterparty risks would need new thinking about risk-management in the asset allocations and some form of very long Government securities. He related Milliman’s experience in the US where the company had worked with a state pension fund. “Target-date funds did not manage the risk, so we had to build a glide path which focused on volatility and which had a tail-risk strategy within 10 years of retirement”.