Retirement Portfolio Resilience Perspective
Primary Pillar: Retirement Portfolio Construction
Supporting Pillars: Behavioural Survivability • Risk Pricing Discipline
This Government submission considers the future design of Australia's retirement income system and the role that resilient exposure to growth assets can play within comprehensive retirement income solutions.
Viewed through today's Retirement Portfolio Resilience Framework, the enduring contribution of this submission is that it shifts the discussion from individual investment products to the design of the retirement system itself. It recognises that retirement portfolios must balance income, growth, risk management and long-term sustainability, and argues that complementary portfolio construction approaches should form part of comprehensive retirement income solutions. While the submission reflects the policy environment surrounding the Financial System Inquiry and Comprehensive Income Products for Retirement (CIPRs), its central architectural insight—that resilient exposure to growth assets is a necessary component of effective retirement portfolio construction—remains directly relevant to the evolution of Retirement Portfolio Resilience.
This Government submission forms part of Gyrostat's constitutional archive documenting the evolution of the Retirement Portfolio Resilience Framework.
Executive Summary
- We support the recommended primary objective of superannuation to provide income in retirement to substitute or supplement the Age Pension. Enshrining this objective in legislation, and implementing the Financial System Inquiry (“FSI”) recommendation 11, will encourage the development of better comprehensive income products for retirement (“CIPR”).
- We make specific commentary on subsidiary objectives in relation to the FSI conclusion that there are a limited range of retirement income products.
- The subsidiary objectives our submission covers are:
- Help people manage financial risks in retirement;
- Be invested in the best interest of superannuation fund members maximising
risk-adjusted returns;
- Be simple and efficient and provide safeguards. - FSI Recommendation 11 observed that CIPRs should have exposure to growth assets and that superannuation funds may work with life insurance companies, other funds or other entities to provide CIPRs. This could include the fintech industry consistent with Government policy.
- We explore the role of equity protected funds as a component of a CIPR. The historical issue that always protecting your portfolio is 'expensive' can be addressed through the management of Australian Securities Exchange (“ASX”) options. This is the key to lowering the cost, and made possible through advances in technology and deregulation.
- The implementation of a risk managed solution requires the following additional features:
- Financially strong counter-party;
- Transparent mark to market valuations;
- Capacity to scale the product offering.
These are aligned with the stated objectives of the Australian Stock Exchange.
