CSIRO-led research to model superannuation spending

A cash cube representing the $18.8 billion dollars of unclaimed superannuation (2011 amount). Dean Lewins/AAPImage

How older Australians spend their superannuation and the impact of suggested legislative changes on retirees, will be the focus of a new CSIRO-Monash superannuation research group.

The A$9 million research project brings together researchers from CSIRO, Monash and Griffith Universities, the University of Western Australia and the University of Warwick in the UK.

The researchers are hoping the findings will help inform government policy on contentious issues such as raising the retirement age, or removing the family home exemption from the means test for the age pension.

“The compulsory super system started about 20 years ago, so we have a kind of half mature system,” said Deborah Ralston, research leader and professor of finance at the Australian Centre for Financial Studies. It will be another 20 years before we see people retiring who have been in the super system for their entire lives, she said.

Professor Ralston said while much of the focus on super in the media was on investment returns and styles, the increasing number of people retiring with more super meant the focus needed to shift to consumption of super, or the “decumulation” phase.

CSIRO research leader Alan Dormer said the research would also investigate the changing relationship between superannuation and the wider economy.

“As superannuation gets bigger in proportion to the economy, we believe it’s not how super will be impacted by the economy, but more how super will impact economic growth.”

Mr Dormer said the 2010 Cooper review of the superannuation system had little focus on the retirement phase of superannuation, with more information required to address the risk retirees are exposed to post the accumulation phase.

He said the research group, which had recently appointed two full-time post doctoral students, aimed to build a number of models that would establish the impacts of major policy changes such as changing the retirement age.

“We know just increasing the retirement age for women didn’t have the impact the government sought, because we had the issue of benefit substitution. Getting people to stay in the workforce is a lot harder than just changing the retirement age.

"If we say we’re going to include the family home in the asset test, or make annuities compulsory in some shape or form, that may have unintended consequences. We’ve already seen financial advisers that are very adept at getting around the rules, so we need more insight before we make changes like this.”

Mr Dormer said the super “cluster” would develop models based on hard data, rather than lobby for any particular policy.

“Everyone in the super industry says don’t keep making small changes, but I don’t think anyone would say the system is perfect. One person’s improvement is another person’s tampering.”

Professor Ralston said there was still a lack of understanding of what the full impact of people working longer would be. “How do you form your social and economic policy cognitive of the fact that not everybody retires at the same age?”

The research group will be able to access data from many industry groups and super funds that have agreed to participate, including Challenger, BT and CBUS.

Susan Thorp, professor of superannuation at UTS, said the challenge for the researchers would be dealing with what is a forward-looking problem.

“With super data, you can have a huge amount of it in which nothing happens.”

Professor Thorp said it was critical that new research used panel data to expose patterns over a person’s life cycle.

“You have to be able to trace the same households over time.”

She added that while Treasury did some modelling on retirement incomes, there was a gap in modelling of what people might do when super rules changed.

“If the CSIRO group can access very large bodies of industry data I’m sure there will be things that others haven’t been able to find in official statistics.”