POWERED BY MOMENTUM MEDIA
Volatility protection could reduce super drawdowns
Superannuation funds could incorporate volatility protection mechanisms into retirement plans to help reduce drawdowns as members have a preference for investments with lower volatility even if it means lower returns, according to a survey.
State Street Global Advisors (SSGA) latest global retirement report found that 59% of respondents preferred their retirement savings to be ‘relatively lower expected returns but with less change of a loss’, 22% preferred ‘relatively high expected returns, but with higher changes of loss’, and 19% did not know.
SSGA said that big drops in value had the potential to knock members’ confidence and that “it is therefore important that superannuation funds limit severe drawdowns and that these benefits are communicated to members”.
Not dissimilar to its survey in 2018, 42% of respondents in 2020 said they were not optimistic about their retirement.
The report noted the continued lack of retirement confidence in Australia was due to the COVID-19 pandemic, having no spare money, uncertainty around retirement plans, and a lack of trust in the retirement system.
“This reinforces the need for saving regular amounts; superannuation funds providing clear member communications to help navigate uncertainty, and regulators enacting legislation to ensure a transparent, efficient, and robust system,” SSGA said.
Another finding from the report was that 31% of Australians wanted their retirement savings to be invested in companies that treated their workers well during the COVID-19 crisis.
SSGA suggested that funds speak to their asset manager about how their stewardship activities were promoting good environmental, social, and governance behaviour in response to the pandemic.
Compared to the rest of the world, the survey found a greater proportion of Australians during COVID-19 had:
- Checked their super balance more regularly;
- Switches to lower-risk investments; and
- Started drawing down early on their super assets.
Recommended for you
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.
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
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
