Member’s Default Utility Function

Member’s Default Utility Function (MDUF)

MDUF v1 Research Awards

To promote the use of MDUF v1 in research, the MDUF working group is pleased to announce the MDUF v1 Research Awards.

Award winners

The first two MDUF Research Awards were presented on 2 July 2018 to Shang Wu of First State Super and Nick Callil of Willis Towers Watson. They were presented at the 26th Colloquium of Pensions and Retirement Research at University of NSW.

The MDUF Research Awards encourage researchers to use MDUF v1 in their research and then share this work publicly. The awards are sponsored by David Bell and Michael Berry. MDUF v1 is an abbreviation for the Member’s Default Utility Function Version 1, a utility function designed to quantitatively represent a sensible, representative set of preferences for a default fund member. It can be used in many areas such as product and service design, and policy research. MDUF v1 was the result of a collaborative research effort by 14 industry practitioners and academics. A range of materials related to MDUF v1 (papers, presentations and models) has been made available via dedicated web pages by industry bodies AIST and ASFA.

Shang Wu’s paper is titled “The Value of Financial Advice for Australian Retirees” and Nick Callil (with co-writers Hadas Danziger and Tom Sneddon) presented a paper titled “Metrics for Comparing Retirement Income Strategies: A Road Test”.

 aist-mduf-research-awards

Left to right: Estelle Liu (Mine Super), Shang Wu (First State Super), Nick Callil (Willis Towers Watson), and David Bell (Mine Super).


About Member’s Default Utility Function (MDUF)

AIST is a proud custodian of version 1 of the Member’s Default Utility Function (MDUF).

The Member’s Default Utility Function is an open-architecture metric which was developed by a panel of academics and industry professionals to assist the industry in providing retirement outcome modelling. The panel has over 200 years of combined relevant experience. The panel considered the question “what is a sensible set of preferences to assume for default fund members in retirement?” It then converted these preferences into a metric which has many applications including the design of post-retirement strategies. This metric is known as MDUF v1.

Below you will find a range of resources, including the Excel model, which are now available to download. 

Item

Description

Author(s)

Status

A short introduction to MDUF v1

A short introductory flyer.

David Bell

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An introduction to MDUF v1

A longer introductory paper which provides broad background on MDUF v1, namely its creation and applications.

David Bell, Estelle Liu, Adam Shao

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Panel biographies

Biographies of all panel members.

-

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Introductory presentation

An introductory presentation which provides broad background on MDUF v1, namely its creation and applications.

David Bell, Estelle Liu, Adam Shao

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Technical paper 1: MDUF v1 – Derivation

A paper detailing in steps the derivation of MDUF v1. This paper is reasonably complex.

Estelle Liu, Adam Shao, David Bell

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Technical paper 2: MDUF v1 – Static Models

Uses MDUF v1 to compare static retirement product solutions (static solutions involve a set of pre-determined rules applied throughout retirement regardless of situation). This paper accompanies the Excel Model. This paper is reasonably complex.

Adam Shao, Estelle Liu, David Bell

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Technical paper 3: MDUF v1 – Optimal Dynamic Strategies

Uses MDUF v1 to derive optimal retirement solutions – candidate products include Allocated pension, life annuities as well as the Age Pension. Alternative measurements (Certainty Equivalent Consumption, Wealth Gap and Extra Annual Return) are calculated. This paper is highly complex.

Adam Shao, Estelle Liu, David Bell

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MDUF technical note - Static Model Calculator

This paper provides technical explanation of the measures and calculation in the excel static model calculator. It should be read in conjunction with the excel model.

David Bell,
Estelle Liu

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Excel model

This model simulates outcomes and estimates utility for four different static retirement outcome solutions. Longevity and investment outcomes are modelled stochastically and the Age Pension is incorporated. This model is reasonably complex.

Estelle Liu, Adam Shao, David Bell

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Working paper

This paper is a document of record for MDUF v1. It records background and objectives of the project and then works through a proposed design solutions for MDUF v1. This paper captures the essence of a number of important debates amongst the Panel. A worked case study (the same as that presented in Technical Paper 3) is included. This paper is maintained in a working paper format and so is not ‘polished’.

Estelle Liu, Adam Shao, David Bell

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MDUF v1 – Questions and Answers

A large collection of questions and answers regarding MDUF v1.

David Bell, Estelle Liu, Adam Shao

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For any queries on the material contained within, please contact the MDUF team at: mduf@mine.com.au