The market downturn has increased superannuants’ awareness of market and longevity risks, resulting in a high proportion of fund members in a recent survey switching to more conservative investment strategies and also favouring products that combat longevity risk.

The major concern among 49 per cent of respondents to the Retirement Planning: the impact and opportunities survey, commissioned by global actuarial firm Milliman, was the impact of the credit crisis on account balances. This was followed by the 30 per cent who worried that inflation would weaken their savings. The survey was put to 1,000 superannuants aged 45 years or more with balances of $50,000 or greater, and was conducted by Sweeney Research between September 29 and October 15.

It showed that 38 per cent of respondents had changed the asset allocations of their super accounts, and that 20 per cent of this number had done so in the last six months. Of those switching recently, 79 per cent moved into conservative options. Identifying other concerns, the survey found that 31 per cent of respondents worried about their financial security in retirement and that 21 per cent were concerned they would outlive their retirement savings. Super funds could do more to combat these security and longevity risks, Wade Matterson, practice leader at the North Sydney office of Milliman, said.

“We’re at an extreme where all risk is being taken on at an individual level. We don’t want to go to the opposite extreme where all risk is being deferred to institutions, but we want to be somewhere in the middle.” Survey respondents were provided with a description of a guaranteed lifetime withdrawal benefit (GWLB), an investment product sold in the US that locks-in returns at a set level each year.

Used in both accumulation and drawdown phases, it aims to preserve capital and combat longevity risks. While 41 per cent of respondents said they would switch to a fund offering this product, their enthusiasm dimmed when the prospect of an additional cost was introduced. Only 51 per cent said they would expect to pay for the feature. “It drives home the fact that in

Australia, when you’re developing products, fees play a key part,” Patterson said.

Low costs and capital growth emerged from the survey as the most important features of superannuation products: while 82 per cent of respondents said low fees were the most important feature, 78 per cent prioritised protection from inflation. When asked to assess the quality of superannuation funds, 40 per cent answered their fund had performed as expected, while 23 per cent said performance was a little worse than expected and 17 per cent said it had been much worse than expected.