Research within the CSIRO-Monash Super Research Cluster has two key themes:

> Superannuation and the economy: exploring the dynamics and interrelationships between the asset allocation of superannuation funds and the wider macroeconomy.

> Australians over 60: examining how we can maximise decision making for superannuants in the transition from the accumulation phase to post-retirement.

This body of research will deliver long-term benefits to retirees, the superannuation industry, policy makers and the Australian economy as a whole. A brief summary of the key research findings is provided below, and further details on this work are available via the links below or the website menu  (left).

More details about the project's research leaders are available here.

Infrastructure Investment and Superannuation (Cluster Project 1)

  • The systematic risk factors of term, default and liquidity (in an asset pricing model) can explain between 37 per cent of the variation of bond returns on a toll road public-private partnership (PPP) and 84 per cent of the variation of bond returns on a hospital PPP. WP2013−02
  • The best predictor of infrastructure returns over the 1997−2012 period was a fixed excess return model of 10 per cent per year. WP2014−05
  • Empirical evidence suggests that listed infrastructure is not a separate asset class and returns are simply a subset of listed stocks with significant industry exposure to the utility sector. WP2014−11

Short- and Long-term Member Behaviour (Cluster Project 3)

  • Participation in pre-tax superannuation contributions declined from 24 per cent to 17 per cent, and post-tax contributions fell from 15 per cent to 5 per cent over the 2002−12 period. Age, income and gender (male) all have a positive association with pre-tax contributions participation whereas for post-tax contributions, income and male gender have a negative effect on average. WP2014−06
  • Members seeking intra-fund advice through a call centre are more likely to be female, older, with a larger account balance, and with longer years in the fund. While women, more than men, tend to seek advice, this is less evident once a web-based facility is introduced (which attracts younger male advice- seekers more than the call facility). Those who seek advice regarding a policy change wait until the last moment to do so. WP2014−09
  • Around one-fifth of members from a large sample made an investment strategy change to an existing balance or future contributions, with men consistently making more changes than women. Changes to investment strategy increase with  time in the fund, higher balances and larger contributions. The superannuation policy changes announced in May 2006 were associated with an increase in investment activity across  a relatively large proportion of members. The global financial crisis appears to be the catalyst for investment change in 2008−09, but only for those with closer proximity to retirement and, possibly, larger balances. WP2015−07
  • Structural features of superannuation create a gender gap in superannuation savings and women’s balances proportionate to men’s are only improving marginally over time. There is little evidence of change in young women’s engagement with the labour market in Australia, as career breaks and part-time work for women remain the chosen strategy for families with young children. While women’s return to full-time work in their mid-40s stabilises the interrelationship between male and female contribution rates, the long-term effects in terms of lost promotions and related workplace opportunities mean that women’s final balances are much lower. WP2015-03

Fund Indexing, Style and Hedge Funds (Cluster Project 4)

  • Fundamental Indexation (FI) creates a broad-based market portfolio, like traditional market capitalisation weighted indices, but weights stocks according to a firm’s economic size, not stock price. FI timed the market well during the technology boom and bust (August 1998 to August 2002), however, underperformed in the global financial crisis against a market capital-weighted index. WP2013−03
  • The performance of commodity trading advisers (CTAs) has, over the long run (short run), a positive (negative) effect on new CTAs. We do not observe a ‘smart monay’ effect, indicating that investors are generally unsuccessful in choosing subsequent well-performing CTAs. WP2014−04
  • High incentive fees in hedge funds do not generate superior risk-adjusted returns during normal market conditions. Rather, increases in incentive levels are accompanied by an increased proclivity to take on risk and increased leverage. WP2014−03
  • The cost of trading in financial markets has irrevocably changed due to the proliferation of algorithmic and high- frequency trading. We compare different immediate price impact models for individual trades using out-of-sample predictions to examine the extent of this price impact. WP2014−08
  • Active management should be manifest through nonlinear exposure to the systematic risk factors that drive hedge fund returns, leading to enhanced performance. However, we find that around two-thirds of hedge funds exhibit only linear factor exposures and hence are 'passive'. What's more, these ‘passive’ managers tend to outperform ‘active’ managers. Also, many ‘active’ managers eventually become ‘passive’. WP2016-06

Superannuation and the Economy: Tracking Systemic Impacts (Cluster Project 6)

  • Using a new type of computable general equilibrium (CGE) model we find that a rise in the superannuation contribution rate increases long-run real GDP, largely via an increase in the savings rate and, at the same time, the structure of the superannuation sector’s activities, relative to other savings vehicles, boosts short-run employment and housing investment. WP2015-05, WP2015-08

Modelling Retirement Outcomes for All Australians (Cluster Project 7)

  • Increasing the Superannuation Guarantee from the previous 9 per cent rate to 12 per cent (effective from 1 July 2025) increases retirement adequacy in expectation only. We find that the retirement adequacy of workers could be more simply improved through investment strategy design that mitigates sequencing risk rather than a broad-based increase in the contribution rate. WP2013−04
  • Costs associated with age-related health treatment and aged-care services during the retirement phase can impact on retirement income levels, income stability and longevity risk. We show that for a broad set of circumstances the risk of premature ruin can be mitigated through a dynamic life cycle investment strategy during the retirement phase. WP2014−10
  • Superannuation savings of Indigenous workers are approximately 27 per cent lower than the average non- Indigenous worker. Further, only 20 per cent of full-time employed Indigenous workers accumulate enough superannuation savings to maintain a comfortable standard of living in retirement. WP2016−01

Comparative European Perspectives (Cluster Project 8)

  • The gender gap in pension savings might be addressed through the more equal distribution of care work in the home, through gender-neutral annuity markets, or through pension splitting and tax-based solutions. WP2014−02
  • While there are many differences between the Australian and UK super (pension) arrangements, due to regulatory changes, compliance costs have tended to increase overall management expenses, thereby exacerbating the very problems these policies seek to address. WP2016−03

Post-Retirement Wealth and its Effect on Health and Well-Being (Cluster Project 9)

  • Stock market increases lead to a significant but modest improvement in life satisfaction and mental health in young and middle-aged males, especially for those with direct exposure to the stock market. For young cohorts, the stock market index acts as a leading indicator of employment prospects, while for older cohorts it directly affects financial satisfaction. WP2014−07
  • Households with a strong locus of control (i.e. belief in the controllability of event, a key component of  self-control) save more, both in terms of levels and as a percentage of   their permanent incomes. Although the locus-of-control gap in savings rates is largest among rich households, the gap in wealth accumulation is particularly large for poor households. Those with a strong locus of control hold significantly less financial wealth, but significantly more pension wealth, than similar households with an external locus of control decision maker. WP2015−04
  • Non-economic factors influence the allocation of financial decision making within a household, in particular, the physical and mental health of each partner as well as their cognitive ability and personality traits. These non-economic characteristics of couples are important predictors of who ‘holds the purse strings', although reported allocations of responsibility are sensitive to whether the male or female reports on who is the decision maker. WP2015−06
  • The pure effect of ageing on total health and aged care expenditure has been relatively small and its effect on disposable income and fiscal balance has been mitigated by increased labour force participation among the elderly and increased savings. While this may change, a focus on greater efficiency in health production and finance is more likely to be effective in delivering high-quality care than trying to restrain the demand for health and aged care among the elderly through finance reform. WP2016−05

Labour Market Policy and Flexibility for Older Workers (Cluster Project 10)

  • Serious flaws in the current representations of older workers provide a weak basis for policy development and potentially exacerbate prejudicial attitudes towards older workers. Older workers’ employment should be examined within the context of market-driven mainstream programs, recognising that policies driven by negative attitudes towards ageing can trap older workers in employment placements sheltered from competition. WP2015−01
  • Age discrimination policies generally focus on jobseekers and workers aged over 50. A survey of working Australians shows that discrimination was experienced by 25 per cent of respondents, but there was little evidence of age differences  in experiences. We argue that there may be an overemphasis on tackling age discrimination facing older workers, and this may entrench ageist perceptions among labour market participants. WP2016−02

Retirement Incomes Needs (Cluster Project 11)

  • Most superannuant retirees in their 60s and 70s drawdown on their account-based pensions at modest rates, close to the minimum amounts each year, consequently most retirees are likely to die with substantial amounts unspent if these drawdown rates continue. WP2016−04
  • Using the CSIRO Simulation of Uncertainty for Pension Analysis Model (the ‘SUPA’ model) to study retirement outcomes under the 2014 superannuation contribution rate regime and the previous schedule, we find that the post-retirement duration of the superannuation fund of an individual will fall by approximately one year, and the probability of ruin will increase by approximately 2 per cent.
  • Simulations using the SUPA model suggest that $851,000 is a sufficient superannuation balance at retirement age to achieve a comfortable retirement, and there is only a 5 per cent chance of exhausting the superannuation fund during the retirement  phase. When eligibility for  the full  age pension is met, a super balance at retirement of only $73,000  is needed to provide a modest retirement income, with a 95% probability.