The federal government’s decision to back the Murray inquiry’s call for a legislated goal for superannuation is an important and necessary step toward improving the retirement income system, global asset manager Dimensional says.
Known for its association with Nobel laureate Robert Merton and his ground-breaking thinking on changing the goal of DC schemes from lump sums to income, Dimensional has been helping to lead the debate locally on how to reform super.
“The Murray inquiry recommended setting a clear objective for super to provide income in retirement and we welcome the government’s acceptance of that,” says Dimensional’s head of retirement investment strategies Graham Lennon.
“Once we have a goal, it’s helpful to assess the current state of the solutions that exist today.”
Lennon says the challenge for the Australian managed funds and superannuation industry is that most existing solutions manage for wealth, not income. Achieving the latter will require products that manage interest rate risk and inflation risk, alongside market risk.
Lennon also welcomed the government’s agreement that retirement income projections should be on members’ statements, but said that information on its own was unlikely to be enough.
“Giving people income estimates on their super statements makes sense,” he says. “But we also need to manage the underlying assets in a way that gives people greater income certainty as they approach retirement.”
Managing about $500 billion for investors globally, including $30 billion for clients in Australia and New Zealand, Dimensional is renowned for its academically grounded approach to investing and its association with some of the leading thinkers in finance.