Portfolio diversification and higher allocation to growth assets can help retirees make their superannuation balances last longer, new research has found.
According to research by SSgA and the Association of Superannuation Funds of Australia (ASFA), retirees who invest in a more diversified portfolio and growth assets will fund their retirement for a further eight years.
However, SSgA Asia Pacific head of investment solutions Mark Wills said, “Many retirees are not comfortable with holding larger proportions of growth assets and are inclined to take what they viewed as the safer option of increasing the cash and fixed income in their portfolios.”
"With many Australians expected to live longer in retirement than ever before, managing the risk that they will outlive their savings will become increasingly difficult,” ASFA chief executive Pauline Vamos added.
“Many people transition to retirement faced with complicated decisions to make and with a deficit of information.
“This leaves them vulnerable to being invested in products that may not deliver the best retirement outcomes.
“We have said for some time now that the industry needs to develop products that deliver a regular and stable income stream, provide longevity risk management and are flexible enough to deal with unexpected events.
“However, at present, the regulatory framework that governs these products has been overly prescriptive, which has slowed innovation and hindered product development.
"The Financial System Inquiry (FSI) made it clear that the way we approach retirement phase investing is due for a significant overhaul.
“It's now up to the government to implement policy settings that will enable the industry to make that happen," Ms Vamos said.
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