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2 © 2015 Deloitte Touche Tohmatsu 2 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
2 © 2015 Deloitte Touche Tohmatsu
Congratulations on your retirement. Here’s your superannuation benefit.
Thanks for playing…
3 © 2015 Deloitte Touche Tohmatsu 3 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
3 © 2015 Deloitte Touche Tohmatsu
Source: ABS,
Let’s start with some demographic statistics courtesy of the ABS
2015 2045
http://www.abs.gov.au/websitedbs/d3310114.nsf/home/Population%20Pyramid%20-%20Australia
5 © 2015 Deloitte Touche Tohmatsu 5 © 2015 Deloitte Touche Tohmatsu
Life expectancy and pension age
40
45
50
55
60
65
70
75
80
85
90
1881-1890 1946-1948 1975-1977 1994-1996 1999-2001 2004-2006 2010-2012
Life Expectancy at Birth
Life Expectancy at 65
Pension Age
Males, ABS Life Tables
6 © 2015 Deloitte Touche Tohmatsu 6 © 2015 Deloitte Touche Tohmatsu
Future life expectancy and pension age
60
65
70
75
80
85
90
95
2010 2015 2020 2025 2030 2035 2040 2045 2050 2055
Life expectancy at 65 Current Pension Age
NCOA Proposed Pension Age Govt Proposed Pension Age
Govt Proposed Pension Age2 ?
Males, ABS Life Tables
8 © 2015 Deloitte Touche Tohmatsu 8 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
8 © 2015 Deloitte Touche Tohmatsu
What is success for the superannuation system?
What is success for a superannuation fund?
Melbourne Mercer Global Pension Index
9 © 2015 Deloitte Touche Tohmatsu 9 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
9 © 2015 Deloitte Touche Tohmatsu
What is success for the superannuation system?
What is success for a superannuation fund?
10 © 2015 Deloitte Touche Tohmatsu 10 © 2015 Deloitte Touche Tohmatsu
Superannuation has been, and will continue to be, a great success and the
envy of the world…
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033
$ b
illi
on
s
APRA market statistics to
30 June 2012
Deloitte projections from
1 July 2012
~1.0 x GDP
~1.8 x GDP
11 © 2015 Deloitte Touche Tohmatsu 11 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
11 © 2015 Deloitte Touche Tohmatsu
What is the purpose of a superannuation fund?
12 © 2015 Deloitte Touche Tohmatsu © 2013 Deloitte Touche Tohmatsu
12 © 2015 Deloitte Touche Tohmatsu
13 © 2015 Deloitte Touche Tohmatsu 13 © 2015 Deloitte Touche Tohmatsu
Pillars of a retirement income system
Pillar 1 Age pension
Pillar 2 Compulsory superannuation contributions.
Pillar 3 Voluntary superannuation contributions and other savings
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
55 56 57 58 59 60 61 62 63 64
65-6
9
70-7
4
75-7
9
80+
Age
Households Persons
Source: Superannuation Policy for Post-Retirement, Productivity Commission Research Paper
Share of people with
super remaining
14 © 2015 Deloitte Touche Tohmatsu 14 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
14 © 2015 Deloitte Touche Tohmatsu
Financial System Inquiry recommendations
Objectives of the superannuation system
Seek broad political agreement for, and enshrine in legislation,
the objectives of the superannuation system and report publicly
on how policy proposals are consistent with achieving these
objectives over the long term.
The retirement phase of superannuation
Require superannuation trustees to pre-select a comprehensive
income product for members’ retirement. The product would
commence on the member’s instruction, or the member may
choose to take their benefits in another way. Impediments to
product development should be removed.
15 © 2015 Deloitte Touche Tohmatsu 15 © 2015 Deloitte Touche Tohmatsu
The strategic objective of a superannuation fund is…
Maximise Members’
Retirement Outcomes
Net Investment Returns
Operating Costs
Products & Services
Member Behaviour
16 © 2015 Deloitte Touche Tohmatsu 16 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
16 © 2015 Deloitte Touche Tohmatsu
…and peace in the Middle East
CIPR: comprehensive income product for retirement
Desired features of retirement income products
17 © 2015 Deloitte Touche Tohmatsu 17 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
17 © 2015 Deloitte Touche Tohmatsu
Trade offs in providing for old age
18 © 2015 Deloitte Touche Tohmatsu 18 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
18 © 2015 Deloitte Touche Tohmatsu
Myth: Australia has a lump sum culture…
0
5
10
15
20
25
30
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
$b
Value of lump sums
Value of income streams
0
10
20
30
40
50
60
70
80
90
100
0 - 50 50 -100
100 -200
200 -300
Over 300
Total
Pe
r c
en
t o
f b
en
efi
ts
Lump sum Account-based pension
Source: Superannuation Policy for Post-Retirement, Productivity Commission Research Paper
19 © 2015 Deloitte Touche Tohmatsu 19 © 2015 Deloitte Touche Tohmatsu
Retirement income products in Australia
94%
5%
1%
Account based pensions
Annuity products
Hybrid products
Source: Mercer Post Retirement Market Trends in Australia, June 2014
20 © 2015 Deloitte Touche Tohmatsu 20 © 2015 Deloitte Touche Tohmatsu
Post Retirement Risks
Financial Risks
• Inflation risk
• Interest rate risk
• Stock market risk
• Business risk
• Employment risk
Information and public policy risks:
• Lack of appropriate information risk
• Public policy risks
Care and housing risks
• Changes in housing needs risks
• Loss of ability to live independently
risk
• Health care risk
Personal and Family risks
• Longevity risk
• Change in marital or partnership
status risk
• Unforeseen needs of family members
risk
21 © 2015 Deloitte Touche Tohmatsu 21 Compliance Considerations © 2013 Deloitte Touche Tohmatsu
21 © 2015 Deloitte Touche Tohmatsu
Some innovation, but more required…
22 © 2015 Deloitte Touche Tohmatsu 22 © 2015 Deloitte Touche Tohmatsu
Pillars of a retirement income system
Pillar 1 Age pension
Pillar 2 Compulsory superannuation contributions.
Pillar 3 Voluntary superannuation contributions and other savings
23 © 2015 Deloitte Touche Tohmatsu 23 © 2015 Deloitte Touche Tohmatsu
Pillars of a retirement income system
Pillar 1 Age pension
Pillar 2 Compulsory superannuation contributions.
Pillar 3 Voluntary superannuation contributions and other savings
Pillar 4 ????
24 © 2015 Deloitte Touche Tohmatsu 24 © 2015 Deloitte Touche Tohmatsu
Connect
Stephen Huppert
Partner, Deloitte
sthuppert@deloitte.com.au
au.linkedin.com/in/stephenhuppert
@stephenhuppert
25 © 2015 Deloitte Touche Tohmatsu © 2013 Deloitte Touche Tohmatsu
25 © 2015 Deloitte Touche Tohmatsu
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