Overviews the pathway forward for super funds under the YFYS performance test including constraints and opportunities.

Submission supportive of Retirement Income Covenant while identifying some of the important next-steps for retirement income policy.

This paper explores the future of the investment management industry under the Your Future, Your Super (YFYS) reforms.

This paper explores how super funds will move forward under the Your Future, Your Super (YFYS) reforms.

It is easy to bemoan the loss of portfolio flexibility created by the poorly designed Your Future, Your Super (YFYS) performance test. But, viewed through a positive lens, there is now a fascinating challenge to integrate the impact of YFYS into a fund’s updated investment model.

The Conexus Institute and CFA Societies Australia have collaborated on a research project exploring the challenges associated with portfolios allocating to illiquid assets.

The challenge of managing portfolios which allocate to illiquid assets remains ongoing. It is far from a set-and-forget problem.

Submission with constructive suggestions for improving the Retirement Income Covenant and some additional reflections on retirement income policy.

Developing retirement solutions is the next big challenge facing the superannuation industry. The Position Paper for the Retirement Income Covenant (RIC) is open for consultation, with the RIC on track to take effect from 1 July 2022.

Developing retirement solutions is the next big challenge facing the superannuation industry. And it is about to get serious...

Geoff Warren and David Bell collaborate to explain the likely choice architecture for retirees and within this consider how to ensure that all retirees find their way to suitable retirement solutions.

All indications are that the Government’s retirement policy, including the Retirement Income Covenant scheduled to take effect from 1 July 2022, will be principles-based, promote choice and competition, and emphasise member engagement as the key to success.

The Retirement Income Covenant (RIC) remains scheduled for 1 July 2022. Minister Jane Hume and Treasurer Josh Frydenberg have both promised a principles-based approach to retirement strategy and encouraged funds to step forward.

This document provides the reviews and reflections from the 2021 Retirement Conference co-hosted by Conexus Financial, Investment Magazine and The Conexus Institute on June 21, 2021.

The Your Future, Your Super (YFYS) reforms have been passed. There has been passion, research, controversy and lobbying aplenty. Overall we think consumers will benefit. The degree of benefit will depend on what happens next. The next steps taken by policymakers, regulators and fund trustees will weigh heavily on consumer outcomes, and ultimately determine the success of YFYS.

There is so much written about investment behavioural biases, but there probably needs to be more written about behavioural biases relating to policy assessment. I’m sure I’ve fallen victim to these biases many times.

One-in-four people have more than one super account. These people pay at least two lots of administration fees and potentially have distorted insurance arrangements. Multiple account arrangements generally occur when employees switch employers. A policy is required only because industry has failed to develop a solution.

The announced changes to the YFYS performance test are positive for consumers. The inclusion of admin fees transforms the performance test into a consumer outcome test, while including additional unlisted asset indices means the test won’t overly constrain funds from constructing portfolios in members’ best interests.

ASFA has cast doubt around claims made in the Retirement Income Review (RIR) that many people are not spending down their retirement savings, being too frugal and preserving large account balances which are ultimately bequeathed. Here I present some basic modelling which further endorses the findings of the RIR while emphasising the need for better retirement solutions.

Soon every super fund will have to provide a retirement solution to their members which sits alongside their existing account-based pension offerings. The impact on the financial advice sector will be significant.

I don’t always agree with Liberal Senator Andrew Bragg, but his observation during this week’s Senate hearing that forcing representative bodies to merge would be a good way to reduce costs to super funds and members was a good one.

Opening statement by David Bell to the Senate Economics Legislation Committee.

The Your Future, Your Super (YFYS) reforms are designed to improve outcomes for superannuants, which is nearly all of us. The reform package is undoubtedly well-intended. Therefore it is critical that it achieves its intended purpose. This has been our focus when we have reviewed one of the most important reform measures, an investment performance test.

At first glance Your Future, Your Super appears very strange policy design from a conservative coalition government, which leads me to ponder whether reform of the award super process itself is the longer game at play.

There is a school of thought that adding a couple of extra indices to the Your Future, Your Super (YFYS) performance test will fix the bulk of its shortcomings. Sadly, this is incorrect.

“Follow the science” is a phrase commonly used to encourage evidence-based decision-making. Frequently associated with topics such as climate change and the COVID-19 pandemic, it is just as applicable to superannuation.

‘Rough justice’ is a term being used by some in support of the Your Future, Your Super performance test. In a nutshell the line of thinking seems to run as follows: if the status quo is viewed as poor (in this case, an expensive industry with lots of agency issues), the policy intent is good (protect consumers from underperforming funds) and the expected outcome appears reasonable (industry consolidation via the removal of underperforming funds), then the policy justifies a few funds inadvertently being treated unfairly. In this context ‘rough justice’ sounds reasonable and readily fits the populist, slogan-driven environment in which we find ourselves. But this isn’t the standard we want to set.

The Conexus Institute has celebrated its first anniversary and expanded its advisory board to include Dr Deborah Ralston and Associate Professor Geoff Warren.

For all the talk about the severity of the Your Future, Your Super (YFYS) performance test, it could have been set much tougher. In some areas the industry has been given a free ride. This adds to the catalogue of issues attached to the controversial policy measure.

In October last year Marisa Hall painted a compelling challenge to asset managers of all types: adopt system-level thinking to create a more sustainable world. She painted a pathway for how this could be achieved, with culture and measurement key enablers. However, I found myself pondering the role of government policy as enabler or inhibitor.

A student project to improve the richness of information in retirement estimates provided under ASIC’s class order relief inadvertently highlighted the many challenges faced by industry, policymakers, and regulators as they seek to make quality guidance accessible to the broad population. The trade-off between tailoring information to be more relevant for people pulls against the desire for such information to be accessible at low cost.

In an environment where fund visibility will be more important than ever, superannuation schemes will need to think deeply about how they promote themselves and their brands to potential new and existing members.

This year’s Budget included the Your Future, Your Super (YFYS) reform package, which will have a significant impact on superannuation. One reform, a performance test, has proven highly controversial. A performance test sounds like good policy to protect consumers, so why is it proving so controversial?

The Review didn’t just explore this issue: it was probably the most significant finding: households not spending down their capital in retirement is one of the greatest sources of inefficiency in Australia’s retirement system.

A group of asset consultants and researchers have asked Treasury and policy makers to consider the possibility that “zombie funds” could be created as one by-product of the government’s new performance test. Further, the group has said that future consolidation among superannuation funds could be stalled if the performance test is implemented as planned in 2021 in its current form.

The Retirement Income Review has achieved many things. It has managed to make a complex system understandable. It used strong principles as its guide. It has achieved its mandate of establishing a fact base while leaving some clear policy direction, all without making any recommendations. Well done to those involved, especially Carolyn Kay, Deborah Ralston and Michael Callaghan.

In combination, complexity and subjectivity form a difficult starting point for effective policy design and it’s my experience that superannuation and retirement are both highly complex and subjective areas.

Pension funds need a generation of investment professionals that are willing to be brave and less conservative than their predecessors if they are to move to the systems level perspectives on investment that is required for better returns and societal outcomes, according to the co-head of the Thinking Ahead Institute, Marisa Hall.

Within a budget of enormous economic consequence were a collection of super reforms which will significantly impact the superannuation system and the retirement outcomes of many Australians. I am sure the proposed measures were well-intentioned. Most will work (perhaps with some unintended consequences) but there is one area that is so flawed that, if implemented as announced, will impair outcomes for consumers.

It’s nearly impossible to have a quality debate about the fate of the superannuation guarantee in media, but as the SG issue is a component of the Retirement Income Review we need a high quality, research-driven approach.

Work is underway - at last - to standardise the way growth and defensive assets are classified. The hope is that...

There are many ways to measure exposure and risk. No single metric is perfect which is why professional risk managers use multiple measures of risk.

The Super System Review shaped the architecture of Australia’s accumulation system

How many superannuation industry leaders truly make every decision through the lens of what they believe is right for their members?

The past financial year has been one of the most volatile on record for stock markets, yet almost every Australian super fund has delivered similar returns.

The best way to integrate different scenarios into portfolio construction is front of mind for investors right now. But as David...

Certainty and risk are at the core of quality advice and at the forefront of client communications, and the value of good financial advice cannot be fully appreciated until these understated concepts are viewed as tangible, creditable benefits to clients.

Ongoing micro-reforms, decumulation solutions, fintech and an end to ideological wars are highlights among the ideas Senator Jane Hume has for improving Australia’s retirement system, many of which can be described as micro-reforms which may disappoint those looking for a single silver bullet big idea.

In most finance courses academics will teach you the maths behind asset pricing and diversification. Often, the first real-world lesson is on the risk of the liquidity mismatch. Over the years that discrepancy between assets and liabilities has proven fatal for companies, industries, governments, banks, managed funds and many hedge funds.

Background: At a recent UNSW virtual research seminar, Calise Liu and Alan Xian presented their research on developing a COVID-19 Susceptibility Index. This interview explores the research and its potential applications. Calise works at Finity Consulting, which specialises in actuarial and strategic analytics consulting. Alan has nearly finished his PhD at UNSW and will start a role at Macquarie University later this year.

As the dust starts to settle on the first round of early access to super, perhaps it is a good time to reflect on the governance and regulation of unlisted assets in super funds. It is a complex area, with consumer protection provided by super fund governance overseen by the prudential regulator.

The current coronavirus crisis has created investment governance challenges for Australia’s superannuation funds – with regard to liquidity requirements – that are relevant to any DC scheme which invests in illiquid assets. It highlights the potential impact of agency issues on decision-making during a crisis environment.

As part of its economic response to the coronavirus crisis, the Federal Government is allowing those facing financial hardship to access their superannuation in two tranches of $10,000. Whether or not to ‘tap’ your super is an important decision. You need to think about the trade-off between your present situation and the one you may face in retirement.

Dispersion of opinion remains alive and well on the topic of how best to approach accumulation vs decumulation investing, but how different are these two regimes in reality?

When we think superannuation liquidity risk, it’s natural to think cashflow liquidity. However, this is just one point of a trident of liquidity issues. Cashflow liquidity, quality of the remaining portfolio, and the equity of the unit price are each important.

Crisis environments are always tough for the investment chiefs of super funds. It’s important to recognise the range of demands they face during a crisis. You shouldn’t expect most CIOs to make “heroic investment calls”.

As an industry we generally tell people what their retirement will look like on average; this is known as deterministic modelling. Typically, we provide little information around the range of retirement outcomes which may be experienced, known as stochastic modelling.

Will those making submissions be able to hold fire and stick to the facts? Facts are difficult to establish in a complex system and they can be difficult to distinguish from beliefs. What may appear to be small differences in assumptions can make a large difference to the assessed outcomes of the retirement system. The ongoing debate between the Grattan Institute and Mercer over retirement adequacy is a case in point. Why would this be?

One interesting observation regarding the current round of merger discussions is that many of the funds publicly mentioned are in good health – generally these funds are experiencing positive net inflow. In contrast, there appears far less activity amongst funds in a less healthy position. Why would this be?

Is the ‘true’ industry fund facing extinction? By ‘true’ industry fund, I mean one that primarily focuses on a single industry even though it may be public offer. Will it be subsumed by the multi-industry public offer profit-for-member fund?

If super is viewed as a blunt tool rather than something which can deliver much more, then Best-in-Show is definitely in play…

Imagine the scenario of a super fund executive enjoying a BBQ with friends, and the taboo subject of remuneration comes up. Would executive remuneration in superannuation pass the community expectations test?