Walk into your local Bunnings hardware shop and you are likely to notice a clear difference to other retail outlets.

In addition to the usual gaggle of barely awake, zitty teenage staff, you can see employees with considerably more years behind them strolling through the aisles of the store, ready to offer advice and share the experiences gained in a previous career as a tradesman or teacher.

These people are not there every day. They often work just one or two days a week, supplementing their pensions and enjoying a chat with customers and their colleagues.

KPMG partner Bernard Salt believes companies such as Bunnings hold the key to the future. Staying in the workforce for longer is going to be inevitable, Salt says. "I think the best strategy, if you are an average Joe, and retire on a modest superannuation, is to maintain some form of modest part-time employment. It is good for your soul, it is good for your skills and it gives you an income stream and makes your super dollars go further," he says.

"I think a lot of other companies would do well to look at the Bunnings model. It is a model for how things will happen."

Next year the first of the baby boomer generation will reach the age of 65, and in the coming decade the proportion of Australia's population that is retired will increase sharply. By 2016, 30 per cent of our superannuation assets will be owned by people relying on those assets as their primary source of income.

While retirees will make up a larger section of society, people will also live increasingly longer and this means there will be less government money to go around. "Baby boomers will say: 'Okay, I am retired. I have paid my tax. Now it is time for you to pay me.' And the government will say: 'Well, thanks very much for your tax 40 years ago, but I'm a bit strapped at the moment, so we are not going to pay you as much as you would like.' That is the bottom line," Salt says.

Challenging the status quo

Working for longer is one solution to add to your pension and make your superannuation go further, but not everybody will choose to work for longer or, in fact, is physically able to do so. Therefore, attitudes towards post-retirement investing are changing.

Increasingly suggestions are made that members should maintain a high allocation to growth assets in the pension phase, abandoning the common wisdom that one should reduce the exposure to equities when you retire.

"Obviously there is a need to protect the downside, [but] I think it would be a mistake to go too conservative too early," REST chief executive Damian Hill says.

"Those who were most affected by the financial crisis where those who were just retired or those who were thinking about it. For the majority of members you are still talking about 15 years or more in retirement, so I wouldn't see the exposure [to equities] drop too quickly in the early years of retirement from the accumulation phase."

Currently, REST uses the traditional split between equities and fixed income investments in its pension fund to protect against stock market falls.

"For the REST products, we have a 70/30 allocation for our default allocation. We do have a slightly more conservative allocation for our pensioner default [fund], but it is still a 60/40-type split," Hill says.

"So it is more conservative, but it still has quite a reasonable exposure to growth assets."

Legalsuper launched a pension-phase product in 2006, which currently has about 10 per cent of the fund's total assets in it. "The level of take up has been quite high, especially in the last two years people have become more aware of the tax benefits," legalsuper chief executive Andrew Proebstl says.

The product offers the same investment choices in terms of risk profiles as the accumulation products, and members' preferences in this product clearly differ from the rest. "It is very clear that people have a more aggressive strategy in the accumulation phase than in the pension phase," Proebstl says.

"Retirees could be more aggressive than they currently are."

The risks of growth

But not everyone is convinced holding a relatively high allocation to growth assets in the retirement phase is a good plan. Some argue the old adage of holding your age in bonds and, therefore, increasing the allocation of your portfolio to fixed income once you get closer to retirement and thereafter still holds true.

Unsurprisingly, PIMCO Australia chief executive John Wilson supports this view. "[People over 50] don't have any income, so they can't replenish capital. We need to have a different investment strategy for that group than for those who are in the accumulation phase. The model that this industry is based on is to serve this mythical 25 year old, who has 35 years of investing ahead of them. Unfortunately, the myth of the industry doesn't accord with the reality," Wilson says.

He argues that once members are starting to draw down from their investments, they should change their allocation to reflect their changed needs.

"Growth assets are called growth assets for a very simple reason: they are designed to grow. It means it is a capital gains sum; it doesn't mean they offer regular income," he says.

He does not suggest that people over 50 should switch all of their investments into bonds, but he argues the current 15 per cent cash and fixed interest allocation is not prudent either. "You should hold your age in bonds," he says.

At 48, Wilson has 45 per cent of his self-managed superannuation fund assets in bonds, while in his HESTA fund he has about 40 per cent in fixed interest. "I have a portfolio that by Australian standards is very fixed interest heavy," he says.

Challenger Financial Group chief executive Dominic Stevens is also sceptical about the ability of equities to provide an appropriate solution.

"I think some people might be a little bit disillusioned about the more risky products and their long-term return performance," Stevens says.

"People in the retirement phase already have 70 per cent of their assets in growth assets. In a global sense, that is off the Richter scale."

He says equities rarely deliver on their growth promise, especially when used in combination with an active fund manager.

"We have to look for the after-fee return of these assets," he says.

"The after-fee return of a balanced fund, which is effectively what most people have in retirement, has not outperformed government bonds."

This is not just because of the influence of the global financial crisis, he says.

"Over 130 years the premium you get over government bonds is about 3 to 3.5 per cent. If you then have a balanced fund, where you have some government bonds and some cash, you get about 2 to 2.5 per cent premium, but if the management fee is 2 per cent, then by definition over the long term you are going nowhere and you are taking all the risk," he says.

Challenger has been vocal on the downside of investing in equities for people who are unable to sustain large drops in their wealth. It advocates buying annuity products, which provide a guaranteed income stream over a defined period of time.

This period can be anywhere between one to 30 years. However, annuity products can be costly, while one could argue that the strong resemblance to life insurance contracts puts them beyond the scope of a standard superannuation fund.

Some asset consultants have pointed out the benefits of life-cycle investment products, in which the asset allocation is automatically adjusted to the age and investment profile of the member.

This approach has become especially popular in the United States, but Proebstl says it is a rather artificial way of determining allocations.

"It's a very mechanical way of investing. We don't think there is anything mechanical about investing; that's why we need fund managers," he says.

Most other super funds are not any more enthusiastic about these products.

Member segmentation

The proposed solution to finding the right investment strategy for the post-retirement phase depends much on who you speak with. What most industry participants agree with is that over time superannuation funds will have to split up their member bases into segments and provide these separate groups with more tailored strategies.

"As the pension assets grow, super funds will be forced to consider to what extent they segregate their assets to post-retirement assets, and to what extent they are going to invest them differently. At the moment, they are large all lumped in together," Hill says.

"In lumping all the investments together you get other benefits of scale. You might retain many of those, [and] you might lose a little bit in the scale game. So these sorts of paths need to be considered carefully."

Wilson agrees. "The winners over the next 10 years will be those groups that realise that they will have to take a much more focused approach to customer segmentation," he says.

But an important point of debate in this is to what degree the superannuation fund trustee should take the initiative in identifying members' needs and to what degree this should be left to the member themselves.

Legalsuper provides education and communication, for example, through newsletters. It also provides tools for members to work out what product fits best with their objectives for retirement.

However, Proebstl believes post-retirement investment strategies are very much the realm of individual choices.

"The difficulty with imposing a strategy on members is that you really need to understand their personal circumstance and which other assets they might have," he says.

Sunsuper, on the other hand, takes a more hands-on approach. "We systematically look at all our members and have mechanisms to identity what they should be interested in," Sunsuper chief investment officer David Hartley says.

Hartley says that besides developing good products and managing these products well, matching the right type of products with clients is equally important.

"If people are not in the right products at the right time you are going to destroy wealth," he says.

But he agrees with Proebstl that in the end it is up to the individual member to decide what strategy is best for them.

"The problem is that people are different; they have different objectives. My father, for example, is getting the age pension and he is quite happy. He said he has got as much money as he ever had. His expenses are very low. He owns his own home. All he has to do is drive to the shop to get his groceries every day. Relatively speaking, he is quite comfortable. Whereas for other people who are living on that same income, they find it far too small," he says.