POWERED BY MOMENTUM MEDIA
Fix lifecycle investments, don’t ban them
While the Productivity Commission (PC) has taken a negative view of lifecycle superannuation products, they should not be dismissed out of hand, according to actuarial research house, Rice Warner.
In an analysis published this week, Rice Warner has maintained that not all lifecylcle products are created equal and that the results of the PC’s modelling are a symptom of design, not an encumbrance of the concept.
It said that, on this basis, it did not believe the PC’s findings should be allowed to result in a ban on lifecycle investments.
“Arguably, a lifecycle product with a full allocation to growth in the formative years, de-risking to the ‘more appropriate’ balanced fund supported by the PC ten years out from retirement will produce superior results, with only a marginal increase in risk for the member,” the Rice Warner analysis argued.
“Alternatively, members could move money into a cash account for any lump sum required at retirement and the first year’s pension payments,” it said. “This will allow them to keep high levels of growth assets as they will not need to draw down on the main account, so they are immunised against a market shock at the time of retirement.”
The Rice Warner analysis suggested that technology, particularly improvements in administration and member services, were driving a trend towards smarter, more personalised defaults and that some funds were already providing or considering lifecycle products that varied with balance and age.
“Access to more data will allow funds to segment membership into homogenous groups using age, gender and account balance as relevant factors,” it said.
Recommended for you
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 Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
would have been nice to get a summary of what the PC had a problem with to give some context. Is this written on the expectation everyone has read the PC mike?