Australia pensions | Pension360

Australia’s Largest Pension to Bring Global Equity Management In-House

In a bid to cut external management costs and handle more asset management duties internally, Australia’s largest pension fund is preparing to hire a team to bring its global equity management in-house.

AustralianSuper’s plan is to bring 40 percent of total asset management duties in-house by 2018.

But for now, the fund is looking to hire a team of managers to manage its global equities investments internally.

From Bloomberg:

AustralianSuper Pty, the country’s largest pension fund, is recruiting money managers as it prepares to start investing in global equities through its own team within a year.

[The fund] expects to have as many as nine people on the new team, said head of equities Innes McKeand, who is traveling to the U.K. next week to interview candidates.

AustralianSuper wants to cut external management costs and aims to manage about 40 percent of its assets in-house by 2018, from the current 15 percent. It already has in-house teams overseeing some of its Australian equities, infrastructure, property and cash holdings and has just hired two managers for Australian small cap investing, McKeand said.

“Global equities is the next big thing” for in-house management, McKeand said by phone Wednesday from Melbourne. “We are just in the process of building the team. In the next nine months to a year we would be funding the team.”

The global equities team will be based in Melbourne and have a mix of Australian and international managers, he said.

AustralianSuper manages $67 billion in pension assets.

Video: Comparing the Retirement Income Systems of Australia and the United States

The above talk was given by John Piggott (University of New South Wales) at the 2014 Pension Research Council Conference; Steuerle spoke about his research into Australia’s “atypical” retirement system, how it compares to the United States’ system, and the lessons that can be learned from the comparison.

Australian Regulator Asks Pension Funds to Improve Disclosure of Fees, Other Investment Expenses In Bid For Transparency

The Australian Securities & Investments Commission asked the country’s pension funds Friday to improve disclosure of fees and other costs associated with their investments.

Reported by Reuters:

The move is aimed to improve the quality of disclosure by funds and allow consumers to make informed decisions, the Australian Securities & Investments Commission (ASIC) said in a statement.

[…]

The industry is plagued by high fees and a narrow range of products for retirees to invest their savings in. Coupled with poor spending decisions by retirees – who often cash in their ‘super’ and splash out on holidays and cars – it has meant more Australians are outliving their investments.

“Substantially higher superannuation balances and fund consolidation over the past decade have not delivered the benefits that would have been expected,” a major review of Australia’s financial system said over the weekend.

“These benefits have been offset by higher costs elsewhere in the system rather than being reflected in lower fees.”

ASIC’s order will apply to all product disclosure statements for superannuation and investment products from Jan. 1, it said in a statement.

“Consumers can have more confidence that industry is disclosing fees and costs more accurately and in the same manner, ensuring comparisons between products are made on the same basis,” ASIC commissioner Greg Tanzer said.

Australia’s pension system as a whole manages $1.6 trillion in assets.

Report: 1 In 4 Australian Retirees Will Outlive Their Savings By 11 Years

A new report from Mercer indicates that 25 percent of Australians could outlive their retirement savings by over 10 years, and calls the situation a “very real economic and social dilemma”.

From Business Insider:

New research by financial services consultancy firm Mercer shows one in four Australian retirees will outlive their savings by 11 years.

It also found that as many as 10% of the population who live even longer may be forced to rely solely on the age pension for 15 years or more, with 54% of Australians expecting to have less money than they need for retirement – falling short by as much as $500,000.

The Financial System Inquiry interim report calls out the lack of effective longevity risk management as a major weakness of Australia’s retirement income system, with Mercer’s managing director David Anderson saying, “Australia is facing a very real economic and social dilemma due to a lack of protection against longevity risk up until now.”

Anderson says longevity risk is a huge threat to Australians’ quality of life and healthcare in retirement, which he says has ultimately put pressure on the public purse and our own personal finances.

Senior partner and senior actuary at Mercer, Dr David Knox, said:

“It’s time to leverage the scale of the superannuation industry to provide longevity risk pooling; the sharing of risk will lead to improved outcomes for everyone.

“Longevity risk is a problem in Australia that demands urgent action… The proverbial certainties in life are of course death and taxes, the uncertainties are when and how much.”

In what is almost certainly not a coincidence, Mercer recently rolled out its LifetimePlus plan, a longevity insurance product that “behaves like a lifetime annuity, creating a ‘pool of lives’ and paying out an income until death”.