The superannuation guarantee has only just turned 20 and the focus has so far been squarely on the accumulation stage, optimising allocations for wealth generation rather than for preservation or withdrawal.
At the end of March, the superannuation sector had 333 funds, including corporate, industry, public sector and retail funds, with all of them offering several investment options for their members.
MySuper was introduced to formalise the minimum requirements for the myriad accumulation products, which made sense, since people had no choice but to put part of their wages in these investment vehicles, yet what constituted a legitimate product had not been enshrined into law.
The development of pension products in Australia on the other hand has only just started.
Currently, pension products are largely the domain of retail funds, resulting in many members of industry funds and other not-for-profit funds exiting their fund upon retirement.
Industry funds have started to explore what they can offer in this area, but opinions differ about what these products should look like and how they should be implemented.
In May, Retail Employees Super Trust (REST) chief executive Damian Hill called for a national debate on what the objectives in retirement should be.
Hill indicated portfolios might have to change for those in the later stages of their working life and in retirement.
This raises questions about whether to segment a member base, what instruments should be used, including annuities and other income-generating vehicles, and whether protection or insurance overlays should be offered to protect members from losing it all just before retirement.
Funds will have to weigh up the benefits of the various bells and whistles versus the cost burden on the entire member base.
Super fund executives have expressed their frustration over the distraction MySuper forms from dealing with the challenges of an aging member base, but MySuper could also provide an interesting lesson for the development of these pension products.
The chance of the government creating a MyPension fund, a default fund in the post-retirement phase for those members who are not involved in the investment decisions of their account balance, is not out of the question.
In fact, Paul Costello, who acted as chair of the Stronger Super Consultation Group in the lead-up to the introduction of the legislation, already flagged in mid-2011 the potential of such a fund, but said it fell outside the scope of the review at the time.
Calls for a change of legislation in relation to pension products have also gained momentum recently.
Many discussions focus on limiting the lump sum people can take out upon retirement and introducing taxation above a certain threshold, and it is likely that, regardless of the outcome of these discussions, some restrictions on how to spend your taxation-light investments will be inevitable.
Launching a full-blown, state-of-the-art pension product and spending significant resources on the implementation of these products in the existing fund structure, therefore, comes not without risks.
After all, legislation might prescribe a form not compatible with the pension option a fund has developed or it will place vastly different requirements on the technological infrastructure underlying these products to enable compliance with reporting obligations.
Delaying the development of a pension product could avoid much frustration and needlessly spent resources, but could also result in a crippling loss of market share.
The call for a national debate on objectives in retirement is, therefore, sensible, but it would be helpful to strive for the active participation of both regulators and policymakers to avoid the administrative headache MySuper has caused.
