Superannuation fund members are increasingly making active investment choices and are less likely to leave their money in default or balanced options than 10 years ago, according to new research from SuperRatings.
In 2008, 73.7 per cent of members in accumulation mode had their money in the balanced option, but by the end of 2017 this had fallen to 65.2 per cent. Balanced options have between 60 and 76 per cent invested in growth assets.
For those in pension mode the change is even more pronounced. In 2008, 56.2 per cent had their money in the balanced option but by last year this had slumped to 37.5 per cent.
So where has the money gone?
Higher growth options (including local and international shares and property) rose from 8.4 per cent to 13.6 per cent of asset allocations. At the same time there was a move in the other direction with the allocation to cash, fixed interest, conservative balanced and capital stable options rising from 17.9 per cent to 21.1 per cent.
For pension phase members, the move has been emphatically to more conservative options which accounted for 17.1 percentage points more in 2017 than 10 years earlier. Other than minuscule increases in exposures to property and international shares, no growth option accounted for a relatively higher stake last year than in 2008 among pension phase investors.
SuperRatings CEO Kirby Rappell said there was a split going on among super fund members in accumulation mode with “younger members in their 20s to 40s looking to make higher returns”.
“They might have relatively low balances but hope to make a difference over time with higher returns,” he said.
How much choice is good?
This is the big question and opinions vary markedly on the issue.
Stephen Anthony, chief economist at Industry Super Australia, dislikes choice.
“It’s clear from the research that the best thing to do for members is to find a balanced growth fund with a long-term horizon and set and forget, letting your money work over time. Choice options in funds underperform,” he said.
For David Simon, principal of Integral Private Wealth, the opposite is true.
“Seeing people make more choices is really good news,” he said.
“Before the GFC [global financial crisis] many people in pension mode were in balanced options. As the market fell they had to sell units to pay their pensions at ever lower prices hitting their potential for recovery. You don’t come back from that.
“A better option is to have one or two years of income in cash, three years in bonds and the rest in a traditional growth option. You’re never in the position of having to sell growth assets at the wrong time.”
Susan Jackson, principal of the Women’s Financial Network, said evidence of increased choice could have two drivers.
“One was, in the GFC, people had balanced options that had up to 80 or 90 per cent in growth which was more than they thought,” Ms Jackson said.
“They watched for 12 to 15 months as the market fell, then bailed and went to cash and they’ve stayed there. I see equal numbers consciously changing for reasons like the low cash rate or changes to the age pension rules.
“Super choices are individual. People need to think about how much money they will need and also what investment choices they are comfortable with.
“Don’t change your options every time the market moves. Think about your allocations when you get your statements and compare your returns to the average.”