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MySuper, MyRetirement, my oath sign me up
BY ALEX DUNNIN | FRIDAY, 28 JUL 2017   1:37PM

It all started innocently enough. In June this year ASFA put out a seemingly innocuous media release that tried to report the extra superannuation capital retirees would need to fund the annual costs of their pets.

Before we knew it, ASFA's Retirement Standard was under attack and the superannuation industry was being lambasted.

Issuing a media release claiming a retiree's pet dog and cat would cost more than $60,000 in capital savings might of course make sense to financial modellers - but that's not how it came across to opinion writers at The West Australian who tore into it accusing ASFA of telling retirees to ditch their dogs.

Never mind that ASFA never said anything of the sort. However, throwing actuarial assumptions at retirees' favorite animal companions was never going to end well.

Another thing ASFA probably didn't expect was Fairfax's Money section running a subscriber seminar where popular economists were reported piling more criticism on to ASFA's Retirement Standard.

A retirement savings benchmark is always going to be controversial because it necessarily forces its creators to make what appear to be value judgements about the lifestyles of average retirees. So no points for guessing that onlookers have enjoyed poking fun at ASFA and its Retirement Standard because it assumes retirees want to eat out in nice restaurants, buy quality bottled wine, go on annual holidays and renovate their bathrooms.

But rather than calling into question ASFA's analysis, it actually does the opposite: it shows how crucial these estimates are and how thankless is the task of developing them. The vague criticisms of ASFA's Retirement Standard that misinterpret it as being some type of compulsory lifestyle plan when it's just a generic savings calibration indicator only reinforces this point.

This also shows us why ASFA's work here is so important as it highlights the absurdity of having a compulsorily imposed retirement savings scheme that forces employers to pay $70 billion in annual contributions for their employees and forces fund members to part with $24 billion each year in fees all without having a clear goal for what all this effort is aiming to achieve.

In this way it's like the flipside for why the government and the superannuation industry fought so hard to legislate the objective of our superannuation system.

Some commentators may meanwhile think the $320,000 ASFA suggests each member of a couple should aim to muster, which would be combined with their annual Age Pensions that actuaries estimate has a capital value of about $600,000, in order to have a "comfortable" retirement is simplistic but at least we have something solid to fight over.

And by the way, this confirms Australians do actually need $1 million to retire comfortably albeit two thirds of this will be paid courtesy of future taxpayers, i.e., millennials.

It also tells us that if a single retiree can on average effectively double their retirement income from about $23,000 in the Age Pension to a combined $43,000 after adding in a basic superannuation income stream just from following a conservative lifetime savings trajectory, it would seem superannuation will do its job.

All these arguments about retirement savings targets are topical because Treasury is coming to the business end of their policy development discussions on the framework for the introduction of MyRetirement products - a framework that some boffin inexplicably decided to call CIPR as in Comprehensive Income Products for Retirement.

From what we know so far these will be opt-in "mass-customised composite retirement income" products that will act as an "anchor to help guide individuals in their retirement income decision-making." In human-speak this means they will deliver reliable income long enough to be useful even for retirees who live a long time, provide lump sum drawdowns and handle the leaving of a bequest.

In other words, if MySuper was like an iPhone solution to simplifying workplace default superannuation, MyRetirement will be like the Galaxy S8.

For retirees dumbfounded by the myriad of investment choices and decisions they have to make come retirement, the introduction of MyRetriement products can't come fast enough.

MyRetirement is thus a solution so obvious it's hard to fathom why it's taken this long to develop them.

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