Asked whether someone under 30 today could have too much exposure by the time they reach retirement, Cahill doesn’t appear to be too concerned. “Forty-six seems to be the magic age when people start to get interested in their super,” he says. “By that stage there is a decent account balance, people begin to understand its importance, and are likely to use our attached advisors to tailor their own retirement plan.”
Melanie Evans, head of BT Super for Life, thinks it shouldn’t be assumed that people will take interest in their super as they near retirement. “A lot of people retire with the same asset allocation they started with,” she says. Evans led two years of research prior to the launch of BT Super for Life on October 30, 2007, uncovering such uncomfortable facts as: “seven in 10 people never rebalance their portfolio”, “less than half of investors know the type of assets they are invested in”, and “half of people under 30 don’t know which fund their super is with”. These findings inspired BT to create a “Lifestage” fund.
Based on the decade they are born, members can choose a fund in which the asset mix automatically becomes more defensive as they get older. Members will have around 90 per cent of growth assets until they reach 57 years of age, at which point the allocation will gradually become more conservative until retirement. But surprisingly, despite its research findings, the Lifestage fund is not the default option. It must be actively chosen. So, for the 50 per cent of people under 30 who don’t know where their super is, if it is with BT it will continue to sit in a balanced portfolio.
Russell Investment Group has a similar offering to BT, but it is known as a “target-date” fund. In this version, members choose the date they wish to retire, such as ‘2030’ and the assets will gradually become more conservative as that date approaches. Linda Elkins, managing director of superannuation business, says Russell wanted a solution to the apathy it perceived among members, and to improve its suite of options.
According to Elkins, most young people should have 100 per cent growth. “Having too much cash is the biggest risk of all,” she says. However, like BT, Russell’s target-date fund doesn’t address a problem that supersedes apathy; obliviousness. Its unaware members still default into balanced options. Elkins would like this to change. “The default options in Australia are the envy of the world, but we need to take it to the next level,” she says. “The 70/30 [balanced default] has served members well, but we can do better. I don’t think we’ve developed something better than the default yet, but we’re working on it.”