Retirement
Lifecycle My Super products leave members $170k worse off
Being in a typical lifecycle My Super product could be costing members nearly a quarter of their retirement nest egg, new research has revealed.
Lifecycle My Super products leave members $170k worse off
Being in a typical lifecycle My Super product could be costing members nearly a quarter of their retirement nest egg, new research has revealed.
Stats released by Rainmaker Information found that lifecycle My Super product members are up to $170,000 worse off in their retirement due to inferior performance.
Lifecycle superannuation products are those that invest members’ money differently depending on their age.
Younger members will have more of their superannuation allocated into equities and property, while older members will have more allocated into bonds and cash.
However, research from Rainmaker Information found that single strategy MySuper products at least matched, if not beating, the lifecycle option.
“While the best lifecycle products perform very well, there is massive disparity between these and low-performing lifecycle products,” said Alex Dunnin, executive director of research at Rainmaker Information.
He stated that over the three-year performance period to the end of November 2020, there was a 3.3 percentage point gap between the top-placed product, Virgin Money, and the bottom-placed product.
COVID-19 made this worse, with the difference in returns over the 12 months to 30 November 2020 growing to 5.5 percentage points.
Despite the current performance figures, Mr Dunnin said the idea behind lifecycle products remains compelling.
“As you get older, your investment risks are dialled down and a greater proportion of your MySuper savings are allocated to more conservative assets like bonds. There is less chance of losing money,” he said.
“But the strategic problem in the lifecycle sector is not the concept behind them, but the huge variation in their outcomes. That is, as a group, they don’t seem to be actually working properly. Their leading products are nevertheless extremely impressive.”
“Too many lifecycle products are struggling to deliver on their promise. Heatmaps produced by the superannuation regulator, APRA, have found pretty much the same thing.”
The need to tackle underperformance in superannuation has gained momentum following the announcement of the Your Future, Your Super reforms in the 2020-21 Commonwealth budget. For the first time, starting in 2021, super funds will have to pass an investment performance test.
Mr Dunnin said some advocates of lifecycle MySuper have argued that it’s not possible to compare lifecycle investment strategies, and that it’s only when members retire that we’ll know if they’ve achieved their goals.
“But that’s absurd. It will be like telling parents that the first time they will ever see their child’s school report is after their child has left year 12,” he said.
RELATED ARTICLES
About the author
About the author
Superannuation
Rest strengthens digital engagement with new leadership appointment
In a significant move to enhance its digital member services, Rest, one of Australia's largest profit-to-member superannuation funds, has appointed Darran Arnott as General Manager, DigitalRead more
Superannuation
Aware Super earns adviser-ready fund accreditation under new national framework
In a significant development for the financial advice sector, Aware Super has been awarded the prestigious Adviser-Ready Fund accreditation. This recognition comes under a new national framework ...Read more
Superannuation
Superannuation overhaul: Payday Super set to enhance retirement savings for millions
In a significant shift set to impact the retirement savings of millions of Australians, the way superannuation contributions are paid is about to undergo a major overhaul. However, despite the ...Read more
Superannuation
Rest expands retail property portfolio with US$250 million investment in US real estate fund
Rest, one of Australia's largest profit-to-member superannuation funds, has announced a substantial investment in a US-based real estate fund, marking a strategic expansion of its retail property ...Read more
Superannuation
TelstraSuper and Aware Super merger advances with key agreement
In a significant development for the Australian superannuation sector, TelstraSuper and Aware Super have reached a pivotal milestone in their merger journey by signing the Successor Fund Transfer ...Read more
Superannuation
Rest applauds legislative reforms to boost superannuation for low-income earners
In a landmark move, Rest has expressed strong approval following the successful passage of legislation aimed at enhancing the Low Income Superannuation Tax Offset (LISTO) through ParliamentRead more
Superannuation
Rest promotes Rachel O’Connor to head fixed income team
In a significant move within Australia's superannuation sector, Rest, one of the largest profit-to-member funds in the country, has announced the promotion of Rachel O'Connor to lead its Fixed Income ...Read more
Superannuation
Employment Hero raises concerns over superannuation bill's impact on small businesses
Employment Hero has raised significant concerns regarding the implementation of the proposed Supporting Choice in Superannuation and Other Measures Bill, which was recently recommended for passage by ...Read more
Superannuation
Rest strengthens digital engagement with new leadership appointment
In a significant move to enhance its digital member services, Rest, one of Australia's largest profit-to-member superannuation funds, has appointed Darran Arnott as General Manager, DigitalRead more
Superannuation
Aware Super earns adviser-ready fund accreditation under new national framework
In a significant development for the financial advice sector, Aware Super has been awarded the prestigious Adviser-Ready Fund accreditation. This recognition comes under a new national framework ...Read more
Superannuation
Superannuation overhaul: Payday Super set to enhance retirement savings for millions
In a significant shift set to impact the retirement savings of millions of Australians, the way superannuation contributions are paid is about to undergo a major overhaul. However, despite the ...Read more
Superannuation
Rest expands retail property portfolio with US$250 million investment in US real estate fund
Rest, one of Australia's largest profit-to-member superannuation funds, has announced a substantial investment in a US-based real estate fund, marking a strategic expansion of its retail property ...Read more
Superannuation
TelstraSuper and Aware Super merger advances with key agreement
In a significant development for the Australian superannuation sector, TelstraSuper and Aware Super have reached a pivotal milestone in their merger journey by signing the Successor Fund Transfer ...Read more
Superannuation
Rest applauds legislative reforms to boost superannuation for low-income earners
In a landmark move, Rest has expressed strong approval following the successful passage of legislation aimed at enhancing the Low Income Superannuation Tax Offset (LISTO) through ParliamentRead more
Superannuation
Rest promotes Rachel O’Connor to head fixed income team
In a significant move within Australia's superannuation sector, Rest, one of the largest profit-to-member funds in the country, has announced the promotion of Rachel O'Connor to lead its Fixed Income ...Read more
Superannuation
Employment Hero raises concerns over superannuation bill's impact on small businesses
Employment Hero has raised significant concerns regarding the implementation of the proposed Supporting Choice in Superannuation and Other Measures Bill, which was recently recommended for passage by ...Read more
