Superannuation industry consultant Towers Watson has come out strongly in defence of retirement income projections.
Towers Watson Australia head of retirement income solutions Nick Callil took exception to suggestions by Sequential founder Adrian Johnstone that it is "not possible" to make accurate retirement income projections.
"Criticising retirement income projections because of the uncertainty of forecasting misses the point," Mr Callil said.
"It is a bit like saying we shouldn’t bother planning for warm weather in summer just because we don’t know if the top temperature in January will be 38 or 42. Forecasts can be valuable without having to be precise," he said.
Towers Watson has generated retirement income estimates for 1.7 million accumulation members in 2015 on behalf of a number of industry and retail funds, Mr Callil said.
"By and large the feedback from members has been that it adds value," he said – adding that some super funds have done it "for years" and some are considering it in the light of the Financial System Inquiry's Recommendation 37 on the matter.
Expanding on the supposed lack of 'precision' in retirement income estimates, Mr Callil said that a projection is simply a guide for members that helps them plan for the future.
"If a projection shows an income of $30,000, it’s highly unlikely that someone will end up with $80,000," he said.
"We all get excited about short-term market movements, but in the context of a long-term projection they actually tend to wash out over time.
"The forecasts are based on reasonable long-term assumptions which of course can’t be guaranteed, but they’re likely to provide a reasonable indication of prospective living standards," Mr Callil said.
While he accepted that individual circumstances can change, Mr Callil pointed out that the projection is updated every year.
"The actual circumstance is reflected in each year’s projection. Not a ‘once and for all’ type of project," he said.
There are four key reasons behind the use of retirement estimates, Mr Callil said: to promote an 'income' mindset; ensuring that the age pension is recognised as a valuable asset in retirement; to shape views about overall income levels in retirement; and to act as a 'call to action' to disengaged members.
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