Superannuation funds are looking at ways to appropriately manage the after-tax evaluation of both pre- and post-retiree members, as the focus on after-tax reporting increases.
"The investment earnings of post-retirement assets are effectively tax free, albeit they get the benefit of franking credits," Parametric Portfolio Associates managing director Australia, Scott Lawrence, told InvestorDaily.
"One interesting issue super funds are looking at currently is how, in an after-tax sense, to manage for retirees and super members in the accumulation stage in such a way that it's optimal for both.
"The most effective way to optimise that is to obviously separate the assets of post-retirement members from pre-retirement members, as they have a different tax rate," he said.
Mr Lawrence's comments come after government's MySuper legislation stipulated that the products promoted the financial interests of members, in particular the net returns, which are after-fees, costs and taxes.
As most fund managers measured on a before-tax basis in order to easily achieve performance benchmarks, it created confusion amongst super fund members.
"There has been a move over the last five years or so towards paying more attention to the tax costs of the investments in superannuation. But making it explicit in legislation is increasing the focus on it in the industry," Mr Lawrence said.
"The important first step is measuring after-tax returns properly, because until each component of the investment process is being measured in an after-tax sense properly and systematically, you can try to do something of benefit but you're unable to really measure the outcome," he said.
"Some funds have taken steps along that path and some have a bit further to go, but there's much more acceptance of tax as a component of the investment process that needs attention now."
Parametric recently experienced a high level of interest from super funds around its services in tax-managed investment processes.
