“Do you think the trustees’ aim is to say, ‘Oh look, for 85 per cent of our investors it would be fine, but unfortunately, for the other 15 per cent, it may not work.’ But other trustees may say, ‘I want to achieve some minimal outcome for all my investors.’ The trade-off is different, depending on what you’re trying to achieve.” Spear’s response is that one of the foibles of default options is a fund can only do what’s in the best interests of the majority or what the fund perceives to be in the best interests of a majority. “A fund would prefer that a member would engage at a particular point in time when they perceive risk and they want something customised, but that cannot always happen. And in the absence of that, there has to be a default, and there has to be a judgment made.” Matterson says part of the danger of extrapolating the default in accumulation through to retirement is that everyone who reaches retirement has different circumstances. It may evolve that funds no longer have a single default, but have two or three which apply to different segments as people go through retirement.

“Identifying which people move into each default will be critical because that’s going to rely on account value, and how much they have once they’ve consolidated other sources of income and other sources of assets as well,” he says. Gerard Parlevliet, CIO at Commonwealth Bank OSF, agrees that funds should provide enough flexibility among their offerings to suit the diversity of lifecycles within their memberships. “Look at the Flintstones,” he says. “Barney and Fred had the same lifecycle. They worked at the same place, they married at the same time, they both had one child. That was life in those days. Now, some people start work at 16, other people start at 25, some people start a family early, some people marry three times, some people want to retire at 55, other people are prepared to work to 75. “There’s no such thing as a common lifecycle for people in a modern society, so our issue is: how can we accommodate individuality because that’s where the problem is and that’s why people go to self managed funds.

When super was set up, it was a savings vehicle, not a destination. Now the issue is ‘what am I going to do with it, how much do I have, what is it going to produce?” John Zavone, head of investment solutions – multi-asset group, AMP Capital, comments that throughout the retirement phase, funds need to allow for flexibility because life is more likely to change for people. During accumulation, everyone has the same objective: maximise the account at age 65. During retirement, more circumstances are likely to change and members may want to change their risk profile at some point, to have the flexibility to shift their risk profile up or down, so having several defaults as a minimum is useful. Greg Cantor, chief executive officer, Australian Catholic Superannuation Retirement Fund (ACSRF), thinks that “many people have lived in a returns-nirvana for the last 20 years. They didn’t feel the 1987 crash, and 2000 it was a bit of a dip. So, the GFC was the first time they’d experienced it and they’d been used to these double digit returns for a long time. “Over a lifetime, double digit returns don’t really exist.