A ground-breaking study into the ruin-year of drawndown account balances is being undertaken by an Australian conglomerate of academics, industry stakeholders and regulators.

The ruin-year, the time in a post-retirees life when their account balance hits zero, is just one subject amongst several being researched by the consortium. Anecdotally there are contrasting stories of how people draw down their account balance. The consortium team is working with ATO data to analysis how funds are drawn down in both institutional and SMSF settings.

Professor Deborah Ralston, executive director of the consortium, said: “Until you know when the ruin year is, it is very hard to make products or design policy.”

Halfway into its three year mandate, the $9 million, high impact, Commonwealth Scientific and Industrial Research Organisation (CISRO) & Monash Superannuation Cluster has ten live projects examining the nation’s superannuation and retirement systems, with a number of these teams producing two to three industry focused papers a year.

Ralston said: “Traditionally there has been an enormous gap between academia and industry. We want to be motivating, creating a hub between us, industry, and regulators. We are very interested in having those parties at the table.”

The preliminary results of the ruin-year project have come in, and because of its complexity two actuaries have been brought on board to interpret the results.

Another project, due to release its first paper next month, is using Mercer’s database to track ten years of peoples choices in fund management, specifically what economic triggers prompt them to make investment choices. And another is tracing high frequency trades (HFT) to provide evidence of how they impact prices.

Ralston said: “One of the advantages we have is that we can access data commercial firms can’t because we’ve signed confidentiality agreements.

The consortium meets with stakeholders three times a year to decide on the direction of projects. Once stakeholders needs have been identified they are prioritised, research is conducted, the results distilled and communicated. With application of this research the stakeholders are able to feedback leading to an iterative process of understanding and improvement.

There are six industry leading stakeholders involved (ANZ, BT Financial Group, Challenger, Vanguard Investments, CBUS and Mercer) with the support of seven major industry bodies and government departments (Australian Bureau of Statistics, ASFS, ATO, Federal Treasury, Financial Services Council, Productive Ageing Centre and AIST). The consortium has room for three more industry leaders, with talks underway with two undisclosed interested parties.

Ralston believes the project is delivering meaningful change, saying: “I hope the life of the project extends beyond the current funding.”

 

 

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