New research shows that many Australians wrongly believed super funds would automatically de-risk in the lead-up to the COVID-19 crisis.
While the average growth (balanced) fund dropped 9 per cent in the month to March 31 and 10.1 per cent for the March 2020 quarter, Russell Investments has found that two-thirds of working Australians believed super funds would automatically de-risk in the event of a market downturn.
“Our research shows choosing investments within super remains a minefield for many working Australians, leading to misinformed choices, or no choice at all,” said Russell Investments managing director for Australia Jodie Hampshire. “This is particularly the case in times of severe market uncertainty where strong emotions and behavioural biases have a heavy hand in decision-making.”
Russell Investment’s survey of 3,000 Australians found that more than a third of Australians (37 per cent) believe their fund manages investments based on their personal circumstances, even if they do not actively choose how their super is invested within their fund. Just one in five people identified asset allocation as one of the most important determinants in achieving adequate superannuation savings for retirement.
“As an industry we can, and should, be doing more to help investors navigate this climate of increased uncertainty,” Ms Hampshire said. “For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy.
“Therefore, having the right asset allocation at the right time is critical – members who don’t take on enough risk when they are able to could see their super balances stagnate while overly aggressive asset allocation at the wrong time can jeopardise a lifetime of savings.”
Super funds also need to move towards a more personalised approach to handling members’ money, with retirement saving strategies tailored to individual retirement goals and financial situations, in order to address a retirement savings gap that is expected to swell to $9 trillion by 2050.
“A key weakness of our current system is its inability to deliver investment strategies that address individual retirement goals,” Ms Hampshire said. “Super funds are serving up one-size-fits-many approaches to investing that might look sensible on average, but in the real world, nobody is average.”
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