ASFA boss Martin Fahy has hit out against critics of Australia’s superannuation system, warning that it is currently in the grip of a contagious false narrative which risks undermining retirement outcomes.
“Our retirement funding system is well advanced when compared with other global systems,” he said at the annual ASFA Conference in Melbourne. “Yet how can it be that locally, our system has so many detractors, despite all evidence to the contrary. Others want to emulate us, yet we find ourselves in a deep malaise that is proving difficult to shake.”
The chief executive officer said the “misleading and dangerous narrative” had labelled the system unaffordable, failing lower income earners, inefficient, opaque and a detractor to wage growth.
“At the most ludicrous level, it suggests that in the worst-case retirement scenario you can eat your house, rely on a rental supplement, and that your grandparent’s retirement was good enough for them and its good enough for you,” he said. It means “in summary we can’t afford your aspirations.”
Fahy’s comments come just as The International Centre for Pension Management, a research-based pension member-organisation, concluded that Australia needs to wake up to the fact the system is a giant bank account with so much complexity that individuals feel disempowered. The CEO acknowledged that changes had been made to superannuation in every Federal budget since the system was first introduced and there had been 26 reviews in ten years.
“The Centre recognises that constant tinkering has meant (the system) is very, very complicated as they perceive it, but the urgency around post retirement is where they’re really concerned,” he said.
The ASFA chief called on Canberra to release the model of Australian retirement incomes and assets (MARIA) into the public domain, as he said that the government’s recently announced review of the retirement income system was an opportunity for the industry to move beyond the “rhetorical hyperbole and dysfunctional narrative economics of retirement funding.”
“An open and transparent publication of the dynamic micro simulation model at the heart of the review would finally lay to rest the falsehoods that plague the superannuation debate in Australia,” he told the audience.
He added the model will provide a platform for an informed evidence-based debate on the important issues of adequacy, benefit design and the impact of assumptions regarding CPI, wage growth, and capital market returns.
Fahy also told delegates that as those pools of capital grow, the super system was poised to take advantage of the opportunities that arise from the “creative destructive” process at play.
“Investment in private capital markets, and internationalisation of our asset allocation are key to finding the investment opportunities that we need to diversify risk and generate returns to members,” he added. “Finally, and perhaps most importantly as we face into the retirement incomes review, the system must be developed in an open and transparent manner.”
He said the modelling underpinning the government review findings should be publicly released and stand up to rigorous scrutiny, without which the “contagious false narrative will continue to permeate the debate”.
“Along the way we will encounter headwinds and setbacks but we must stay the course with our aspirations and stare down those that would dismantle our superannuation system with outdated thinking,” he concluded.