Innovation set to shake up maturing super system

By Grace Ormsby

November 11 2019
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Australians should expect a “fundamental shift” to the investment strategies on offer for retirees in the not-too-distant future, according to a retirement investment expert.

Fidelity International’s head of client solutions and retirement, Richard Dinham, has indicated there’s a growing recognition that with superannuation assets valued at $2.8 trillion, there’s a need for new solutions for people reaching the drawdown phase of their investing life cycle.

“When people are saving for retirement, the focus tends to be solely on performance,” he stated.

“While that may be appropriate during the accumulation phase, it fails to address the complex needs of those people approaching retirement or in retirement.”

Mr Dinham said as the “enviable superannuation” system matures, more people are reaching retirement with large pots of savings, but “are doing so at a point when cash rates are at all-time lows”.

The effect is that the industry will develop “more innovative solutions to meet the needs of today’s retirees”.

Mr Dinham also made the case for better education of retirees and their advisers to increase the understanding of factors that might impact on retirement outcomes.

He argued that while retirees still need to take appropriate investment risk to address inflation and longevity risk, “there also needs to be a focus on the impact of market volatility on retirement outcomes, known as sequencing risk”.

While the positive impacts of compounding and dollar-cost averaging are well understood when it comes to saving, Mr Dinham said many people “are not aware that the opposite is true during decumulation”.

“In fact, limiting losses in retirement has a more powerful effect on long-term growth than capturing the full upside of market gains,” he said.

“You can’t spirit away market risk, but you can sensibly manage it.”

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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Retirement