The Towers Watson Retirement Strategy Appraisal (RSA) framework has been designed to help superannuation trustees cope with the complexity of assessing multiple possible outcomes for their members.
Towers Watson Australia head of retirement income strategy Nick Callil noted that developing a super fund strategy is “no easy task”.
“Given the range of retirement products and strategies available, the multitude of different risks and preferences that matter to retirees, and complex implementation issues, it is little surprise that no universal solution presents itself,” Mr Callil said.
“While it is tempting to rely on existing solutions which are in place, and are known and understood by members, innovation continues to occur in the product marketplace, and funds must consider whether any of the new breed of products can better meet retirees’ needs.
“Further, as funds develop greater internal resources, there are a number of strategies which can be developed by funds themselves and offered without the need for a third-party provider, which may also warrant close consideration,” Mr Callil said.
A rigorous, “member-centric” assessment of outcomes is required to properly consider a new superannuation product, Towers Watson said in a statment.
“However, a key obstacle to undertaking this assessment has been the complexity of comparing retirees’ outcomes from products with diverse features, return drivers and payoff profiles,” said the statement.
Towers Watsons’ RSA framework condenses the possible objectives that retirees may have for a retirement product or strategy to a “manageable number”.
“These objectives cover the wide range of preferences or priorities that retirees may have for their retirement, including delivery of income throughout retirement, a limit on variability of retirement account and access to capital during retirement,” said Towers Watson.
Mr Callil said it is “critical” that the superannuation industry consider member outcomes when designing products.
“As the product marketplace becomes richer and more diverse, a robust means of comparing products against members’ objectives is essential,” Mr Callil said.
“Funds need to be able to demonstrate why they have selected a given product suite, and how these products will deliver outcomes that meet members’ income, stability and liquidity needs.”
