The Super System Review panel did not include life-cycle options in MySuper because the investment returns of such vehicles were too low to provide an appropriate level of retirement savings.
The panel had asked actuaries to model the returns of a life-cycle fund that would automatically adjust the asset allocation of the fund to a gradually more conservative profile at certain intervals during the investment period, based on the age of the member.
"We asked them to model the lifestyle option, and it came in closer to conservative, but somewhere between conservative and balanced," former panel member Sandy Grant told the Association of Superannuation Funds of Australia conference last week.
The reason life-cycle funds produced slightly better results than conservative funds was logical, Grant said.
"You've got your money at risk at the wrong time. When you've got bugger all in your account, you've got a high interest rate going. When you've got a sh*tload in your account, you've got bugger all interest. It is double bugger all," he said.
Russell Investments government and institutions managing director Geoff Peck agreed that from an investment perspective it made more sense to keep members in a traditional balanced fund until retirement, rather than mechanically adjusting allocations without regard for the underlying investment decisions.
However, Peck also said trustees should have a clear process for transitioning members from the accumulation phase to the retirement phase.
"How you engage with that transitioner actually has a fairly significant bearing on the way you should invest during that transition," he said.
"Without that a MySuper member might legitimately go back to the trustee saying: 'Well, you knew I was going to retire and, therefore, why didn't you act more conservatively with my investments in the lead up to that?' I think there is going to be an argument around these sorts of things."
But he also said the right way to reallocate assets depended much on the individual circumstances of the member.
