Liquid-growth strategy key to longevity

2 August 2011
| By Ashleigh McIntyre |

Supporting members as they transition into retirement may not be as hard as first thought, according to a new report which suggests funds can provide solutions using their existing retirement products.

The latest Rice Warner Actuaries’ Touchstone report suggests that super funds could be assisting their members by moving away from short sighted peer investment strategies into genuine long-term strategies that are linked to the objectives of the investment options.

While the report said there are many ways of doing this, it also said it was “easier to point out strategies which will not work than give examples of those which will”.

One suggestion was to use a ‘liquid-growth’ strategy, which involves splitting a retirees’ superannuation into two pools of money — one for liquidity and one for growth.

The liquidity pool, which would be invested in cash or similar assets, would be available to meet the drawdown amounts in the first two to three years of retirement.

The growth pool would continue to be invested in a long-term growth strategy, which would be similar to that deemed appropriate for the default strategy for accumulation members.

“The goal is to minimise the need for redemptions to be made from growth assets during market downturns, while keeping as high a proportion as possible invested in growth assets,” the report said.

As well as restructuring the default strategy to separate liquidity and growth requirements, Rice Warner suggests funds could undertake comprehensive member analytics to segment pre-retirees into homogenous groups in order to help them prepare for retirement, and they could provide tools to support individualised advice.

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. ...

10 months 1 week ago
Kevin Gorman

Super director remuneration ...

10 months 2 weeks 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 ...

10 months 2 weeks ago

The profit-to-member super funds are officially operating as a merged entity, set to serve over half a million members. ...

1 day 18 hours ago

Super Review announced 21 winners at the annual Super Fund of the Year Awards, including the recipient of the prestigious Fund of the Year Award....

2 days 9 hours ago

APRA data shows the CFMEU accounted for 28 per cent of super fund industrial contributions, with the shadow treasurer calling for a prompt investigation into the payments...

3 days 13 hours ago