The Federal Government missed an opportunity in reshaping the thinking around post-retirement income by setting MySuper to cut off at retirement age, according to Mercer head of investment consulting Graeme Mather.
He said the Federal Government should have considered post-retirement income needs first and then worked backwards in setting the framework for MySuper.
"The Government should have legislated on post-retirement goals, first but the focus will continue to remain on the accumulation phase instead of post-retirement or whole-of-life savings models," Mather said.
"There is a need to change the mindset to income in retirement away from receiving a lump sum at age 65.
"Industry and the Government need to take action on how they describe superannuation to fund members because fund balances mean nothing. The focus should be on the projected income in retirement — and if that is not sufficient what people can do to ensure they get closer to the required amount."
Mather said the main demographic group of concern is those aged 45 and above as many are likely to face a savings shortfall in the post-retirement years.
"People aged in their 20s now will have the benefit of reaching retirement with an 80 per cent replacement ratio of their pre-retirement income. However people who are currently looking to use the aged pension need to be considering the use of active assets into retirement."
Mather said he expected changes would take place due to shifts to life-cycle investing currently occurring and that in 15 years individual superannuation fund members would have specific tailored strategies matched to their retirement income goals.
"There will be a need to develop systems that can do this — but they are already in use in the United States — and to overcome the practical challenges such as how far advice can be automated under current regulations."
