Don't limit lifecycle products to age, says Dimensional

28 February 2012
| By Tim Stewart |
image
image
expand image

Dimensional has praised the Government for allowing lifecycle options within MySuper products, but warned against limiting them solely to age at retirement.

In a submission to the Parliamentary Joint Commission into MySuper, fund manager Dimensional pointed to section 29TC(2) of the draft MySuper bill which outlines the 'lifecycle exception'.

The section states that lifecycle options can be based on age only, or "the age of members and other prescribed factors in prescribed circumstances".

According to Dimensional, the "other prescribed factors" should include: member salary and contribution rates; personal retirement income objectives; desired retirement age; members' personal investment experiences; and the age pension.

Lifecycle products that only take age at retirement into account, or "target date funds", are limited because they aggregate individuals' assets according to one factor: their retirement date.

"A simple lifecycle product based solely on the age of individual members ignores the fact that members still have individual goals in terms of the level of income they will require at the end of their working lives," the submission said.

Dimensional argued that trustees should not be barred from seeking to personalise the investment process just because a member had selected the default option.

"While our solution still supports the concept of 'auto-pilot' and minimal member engagement, it is designed to more clearly reflect each member's retirement destination and makes adjustments to the 'flight path' when economic or member circumstances dictate," the submission said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

11 months ago
Kevin Gorman

Super director remuneration ...

11 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

11 months 1 week ago

Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Co...

2 days 3 hours ago

Demand from institutional investors was the main driver of growth in Australia’s responsible investment (RI) market in 2023, as the industry continued to gain momentum....

2 days 3 hours ago

In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges....

2 days 4 hours ago