Retirement
Aussies in the dark on super details
Widespread ignorance among superannuation members is leading to poor asset allocation, with members wrongfully believing their money is being de-risked during the downturn, new research reveals.
Aussies in the dark on super details
Widespread ignorance among superannuation members is leading to poor asset allocation, with members wrongfully believing their money is being de-risked during the downturn, new research reveals.
According to results commissioned by Russell Investments, two in three Australians believe their superannuation is automatically de-risked to protect members’ balances in the case of a crisis.
The research, completed in January before the COVID-19 pandemic, showed 67 per cent of members did not know how their money was invested or just left it in a default option.
Managing director of Russell Investments in Australia Jodie Hampshire said the impact of COVID-19 had shed light on how exposed many Australians remain in today’s modern defined contribution super environment — but it also gave clear direction on how we can do better.
“As an industry we can, and should, be doing more to help investors navigate this climate of increased uncertainty,” Ms Hampshire said.
“For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy. Therefore, having the right asset allocation at the right time is critical — members who don’t take on enough risk when they are able to could see their super balances stagnate while overly aggressive asset allocation at the wrong time can jeopardise a lifetime of savings.”
Not only do superannuation members think their superannuation de-risks automatically, more than one in three believe funds are basing decisions on the members’ personal circumstances.
The research also showed just one in five people correctly identify asset allocation as one of the most important determinants in achieving adequate super savings for retirement, highlighting a disconnect between how super is invested and outcomes for members.
Ms Hampshire said that asset allocation is often overlooked in industry discussions around retirement income adequacy compared to other considerations such as fees, which have a smaller influence on retirement outcomes.
While highlighting the superannuation industry works hard to educate members through providing information they need, she concedes the complexity of superannuation makes it difficult for everyday Aussies.
“Our research shows choosing investments within super remains a minefield for many working Australians, leading to misinformed choices, or no choice at all. This is particularly the case in times of severe market uncertainty where strong emotions and behavioural biases have a heavy hand in decision-making,” Ms Hampshire concluded.
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