Press Release

Contact:
Kate Fields
Telephone: +61 2 8249 1121
kfields@statestreet.com
Email:

Keep clear

ASFA and State Street Global Advisors Announce New

Research About the Future of Retirement Income
SYDNEY, 25 March, 2015 Portfolio diversification and a greater allocation to growth assets are likely to help retirees
make their superannuation last longer, at a time when Australians are living longer than ever before, according to new
research from the Association of Superannuation Funds of Australia (ASFA) and State Street Global Advisors (SSGA).
Released ahead of ASFAs Investment Interchange conference, the report found that retirees with a defensive portfolio (75
per cent cash/fixed income and 25 per cent Australian equities) should reasonably expect to be able to draw down on
their superannuation until the age of 90, taking into account receipt of a part Age Pension.
However those who invest in a more diversified portfolio (43 per cent cash/fixed income, 26 per cent Australian equities,
17 per cent international equities, 10 per cent alternatives and 5 per cent property), would be able to fund their
retirement, on average, for an additional eight years, before their savings run out.
With the Intergenerational Report sparking a lively debate about how retirees will manage an increasing degree of
longevity risk, the ASFA and SSGA report highlights the importance of ensuring the regulatory framework for retirement
income stream products is adjusted to allow product innovation to flourish.
ASFA CEO Pauline Vamos said, With many Australians expected to live longer in retirement than ever before, managing
the risk that they will outlive their savings will become increasingly more difficult. We have said for some time now that
the industry needs to develop products which deliver a regular and stable income stream, provide longevity risk
management and are flexible enough to deal with unexpected events. However at present, the regulatory framework that
governs these products has been overly prescriptive, which has slowed innovation and hindered product development.
The Financial System Inquiry (FSI) made it clear that the way we approach retirement phase investing is due for a
significant overhaul. Its now up to the Government to implement policy settings that will enable the industry to make that
happen, Ms Vamos added.
In addition to the above findings, the report also found that the average couple in Australia will need around AU$500,000
to live comfortably in retirement assuming receipt of a part Age Pension, and the couple remaining relatively healthy and
owning their own home.
However we all know that as we age, unexpected health, medical and other costs can arise, and we may end up living
longer than we plan. With escalating pressures on the federal budget, its probably not the best idea to rely on the
government to fund your retirement, as well as your other age-related expenditure. Save as much as you can now, and
protect yourself against possible policy changes down the track, said Ms Vamos.
Mark Wills, the Asia Pacific head of SSGAs Investment Solutions Group, said many retirees are not comfortable with
holding larger proportions of growth assets and are inclined to take what they viewed as the safer option of increasing the
cash and fixed income in their portfolios.
Based on our simulated returns, this approach is likely to shorten the period they can draw down on their lump sum, he
said. Life expectancy is increasing and people will need portfolios with a good probability of lasting at least until the age

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Press Release

25 March, 2015

of 90. Growth assets, which will generate sufficient returns to support lifestyle aspirations, outpace inflation and minimise
longevity risk are critical, along with some downside risk protection.
The reports analysis identified three investment outcomes relevant to thinking about retirement income: average,
pessimistic and optimistic.
While the average outcome for a defensive portfolio would be a lump sum which lasts until the age of 90, under the worst
case scenario, there is a 75 per cent chance the lump sum would be fully consumed by the age of 84. This is significantly
less than the average life expectancy forecast by the Intergenerational Report in 2054-55 of 95.1 years for men and 96.6
years for women.
By contrast, under the most optimistic outcome in a defensive portfolio, retirees would have a one in four chance of
making their lump sum last until the age of 105.
Ms Vamos says this highlights why it is so important for people to use tools, calculators and advice services as they are
nearing or entering retirement.
Many people transition to retirement faced with complicated decisions to make, and with a deficit of information. This
leaves them vulnerable to being invested in products that may not deliver the best retirement outcomes. Getting the right
information at this critical period can help you make good investment decisions which can make a massive difference to
your savings and lifestyle in retirement, Ms Vamos concluded.

About ASFA
ASFA is the peak policy, research and advocacy body for Australias superannuation industry. It is a not-for-profit, sector-neutral, and non-party political
national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of
policy and industry best practice.
About State Street Global Advisors
For nearly four decades, State Street Global Advisors has been committed to helping our clients, and the millions who rely on them, achieve financial
security. We partner with many of the worlds largest, most sophisticated investors and financial intermediaries to help them reach their goals through a
rigorous, research-driven investment process spanning both indexing and active disciplines. With trillions* in assets, our scale and global reach offer
clients unrivalled access to markets, geographies and asset classes, and allow us to deliver thoughtful insights and innovative solutions.
State Street Global Advisors is the investment management arm of State Street Corporation.
*Assets under management were $2.45 trillion as of December 31, 2014. This AUM total includes the assets of the SPDR Gold Trust (approx. $27.3 billion
as of December 31, 2014), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent. Please
note that AUM totals are unaudited.

State Street Global Advisors

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