Superannuation members should take a ‘whole of life’ approach to their fund choice and consider investing in a target-date fund instead of their default super options, a Mercer executive has said.
Investment Consulting Australia and New Zealand business leader Graeme Mather told InvestorDaily this approach is something advisers should really be pushing with their clients.
“We should challenge the status quo of putting everyone into a balanced fund,” he said.
“Eighty-six per cent of members in super are in the default option which is a balanced fund with 70 per cent equities and 30 per cent bonds.
“What we are saying is, we need to innovate, we need to be better, we need to look at making the default better for superannuation fund members.”
He added that although the ultimate solution would be to group people together based on their characteristics and give a specific solution, it is too complicated.
“What we’ve proposed is a more simple age-based default option which we think is better than just putting everyone into a balanced fund,” Mather said.
“It basically means a member is reducing risk over time, which makes sense.
“At the moment you’ve got a 25 year old and a 70 year old invested in the same fund when clearly they have completely different risk tolerances. One of them is contributing and one is not, one can afford to take investment rest and the other can’t. It doesn’t make sense to have everyone in the same fund.”
