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A campaign by the Grattan Institute against lifting the Superannuation Guarantee rate to 12 per cent is based on a “misleading” model, according to a new Mercer report released today.
Mercer senior actuary and report author Dr David Knox said the Grattan findings used a series of assumptions that were not realistic for the average Australian.
“Our report is the first to offer a detailed analysis of Grattan’s research assumptions, many of which don’t stack up to closer scrutiny,” Dr Knox said.
“In light of the recent announcement of a review of Australia’s retirement income system, it is vital to counter misleading conclusions to ensure all discussion and debate is grounded in reality and typical behaviour.”
Mercer’s review found Grattan’s assertions were based on a number of flawed assumptions, including:
Dr Knox said Grattan’s sole focus on retirement income also failed to consider the need for flexibility to provide retirees with access to capital, an important feature of retirement products.
“Mercer’s research has shown that retirees want a stable income for their whole life, as well as access to capital to provide them with some protection from unexpected expenses that can easily occur during retirement,” he said.
Dr Knox warned policy makers to approach Grattan’s research with “considerable caution” given it was limited to “a single cameo” that had given rise to “misleading” conclusions.
“It’s critical that any modelling of retirement incomes considers a significant number of cameos to provide policymakers with a better understanding of the implications of different policies,” he said.
“We should recognise that the next generation will face the effects of the changing workforce, reduced home ownership, and financial implications associated with an ageing population. We cannot assume that the future will reflect our past experience. It is much more complex than that.”
Mercer’s report, A Review of Grattan’s Work on Super, can be found here.
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Mercer delivers advice and technology-driven solutions that help organisations meet the health, wealth and career needs of a changing workforce. Across the Pacific, organisations look to Mercer for global insights, thought leadership and product innovation to help transform and grow their businesses.
Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan Companies (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people with 76,000 colleagues and annualized revenue approaching $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com.au.
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