The industry was moving too slowly on developing postretirement products, said AIST’s CEO, Fiona Reynolds, pointing to evidence of the flight to selfmanaged super funds, which were later described as the “new garden shed for men when they retire”, by First State Super’s CEO Michael Dwyer. The huge task ahead of funds was in developing income streams with allowed for three risks – longevity, inflation, and the marketlinking of assets – said Challenger’s Cooper. “The Government’s position is a fund which offers a post-retirement solution must address the three risks, but [funds] are not being forced to do this in MySuper. “There’s no excuse to put this in the too-hard basket,” he said. “The first baby-boomers are retiring this year.” The current rise in oil prices could be a harbinger of inflation, which – even at 3 per cent a year – would “seriously erode purchasing power over 30 years”.

He dismissed the commonly espoused idea that equities were a hedge against inflation, like “boats on a rising tide”, and that “retirement is not a time for winners and losers”. “In four of the past 10 years,” he said, “the super system has lost money – in 2002-03 and 2008- 09, so members had less money, regardless of the asset allocation – other than conservative allocations in early 2002.” Deferred lifetime annuities were “trapped in a morass of inconsistent and conflicting issues and rules”, Cooper said, “and we’re not allowed to issue them” due to matters involving tax, the prudential regulator and Centrelink. Cooper argued that annuities were “the new asset class” with returns and terms certain and, as such, they were a “zero-volatility asset class”.

When it was pointed out that the UK, the world’s most developed annuity market, had just abandoned compulsory annuities at 75, Cooper responded that the UK Budget could not afford the £2-3 billion in tax breaks and that 75 was “a little too young for compulsory annuities”. Milliman’s Matterson agreed with Cooper’s assertion that annuities could be a new asset class, but said the industry’s approach to post-retirement had to be broader than an annuity or an allocated pension. “It must move to asset allocation that’s more dynamic”, with more awareness of tail-risk. The industry must move beyond static thinking about accumulation and lump sums. “Retirement is a journey, not a destination,” he said, and funds had to decide if they were providing members with a chauffeur, a map, or merely the keys to the car. Evans says members suffer from a dearth of education services as they approach retirement.