Are DC pension funds fit for purpose [in retirement]?

Berle V Symposium

Jeremy Cooper

13 May 2013

Australia is a DC market

2

Switzerland

Germany

Canada

Israel

United States

New Zealand

Australia

Italy

Greece

Chile

0.00 20.00 40.00 60.00 80.00 100.00

DCDB

DB funds are typically cheaper to run

3

Australi

a

Estonia

Korea

United St

ates

Turke

y

Finlan

d

Canad

aJap

an

German

y

Belgium

Italy

Chile

Portuga

l

Austria

Averag

e ex A

ustrali

a

Greece

Icelan

d

Netherl

ands

Norway

Spain

Poland

Slove

nia

Denmark

Slova

k Rep

ublicIsr

ael

Hungary

Mexico

Czech Rep

ublic0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Source: OECD Global Pensions markets in focus (2010 data) July 2011

Austra

lia

Avg. e

xc. A

ustra

lia

Is super’s asset allocation a problem?

Pension fund asset allocations for selected OECD countries

4

What retirees really want

Health

Longevity

Peace o

f Min

d

Infla

tion

Access

ibilit

y

Volatili

ty

Bequest: h

ome

Bequest: o

ther

0102030405060708090

100

Very important Somewhat important

5Source: National Seniors Australia

Measure/manage

6

Climbing the mountain of super

7

25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Age (x)

% o

f u

ltim

ate

reti

rem

ent

un

its

50% invested for more than 37 years)

75% invested for more than 20 years

Source: Challenger estimatesAssumes 7% pa return in accumulation, 5% pa return in retirement

Proportion of retirement ‘units’ accumulated by age

Dark pools

8

Baron Myners

9