Industry associations have renewed their call for the inclusion of superannuation benefit projections in annual statements in an effort to engage members more with their retirement savings.
The Institute of Actuaries of Australia (IAA), the Australian Institute of Superannuation Trustees (AIST), the Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council (FSC) all said inclusion of projections would help increase voluntary contributions.
IAA called yesterday for the inclusion of projections on the back of a new survey that showed about 80 per cent of industry executives agreed funds should include member projections in annual statements.
"Superannuation benefit projections, if done properly, have the potential to provide meaningful benefit to super fund members by allowing them to track their progress towards their retirement goals, and to encourage them to make added voluntary contributions where appropriate," IAA chief executive Melinda Howes said.
"The Institute of Actuaries survey shows that among the best ways to produce meaningful projections is to have standardised assumptions, to include both a lump sum and annual income estimate, and to include age pension entitlements," Howes said.
The survey found that 75 per cent of respondents believed that a projected retirement benefit for a member should be shown as a lump sum amount with a corresponding annual income amount.
About 62 per cent believed the superannuation benefit projection calculations should include age pension entitlements.
The survey was held last week among 50 senior executives, including chief executives, senior management and actuaries.
"AIST supports this move - as it did in its Cooper submissions," AIST chief executive Fiona Reynolds said yesterday.
Reynolds said that benefit projections need to include the impact of pension entitlements and reflect individual account balances if they are going to be meaningful for the majority of Australians.
"At the moment, some 80 per cent of retirees receive some form of age pension," she said. "Even when our super system is fully mature, the majority of retired Australians will still be at least partly reliant on the age pension."
Annual income estimates that include age pension entitlements would help members understand how much their super balance will give them in retirement and whether they are on track with their super savings to achieve the sort of retirement lifestyle they expect, she said.
ASFA chief executive Pauline Vamos said people are better engaged if they can relate to their weekly or monthly likely income in retirement. "Then they can see the gap," she said.
Vamos said the projections should include as many variables as possible, including the age pension, to get an accurate idea of savings.
"There are always difficulties with projections, but people need to have an idea of what they can expect," she said.
The Financial Services Council said it was essential to ensure all key assumptions are standardised and set by ASIC with the assistance of the Australian Government Actuary.
"The Council believes the Draft Regulatory Guide issued by ASIC on 21 October 2009 provides an appropriate mechanism for the superannuation industry to assist super fund members to engage with their superannuation and establish whether they are on the right savings trajectory," FSC chief executive John Brogden said.
"Given the difficulty and uncertainty of making long-term projections, we believe it is appropriate that any forecasts are clearly identified as estimates and that they are not to be used for comparative purposes," Brogden said.
