Just like the money in your bank account, super is your hard-earned money. The only difference being, it’s designed to support you in retirement, and you generally can’t access it until you reach preservation age, or meet a condition of release. Once you (or your employer) contribute money into your super account, we invest it for you. If you don’t make a choice, your super is automatically invested in our Lifecycle Investment Strategy. This strategy is designed to take the worry out of managing super by automatically investing your nest egg in an investment mix we consider appropriate for your age.
On Thursday, 25 March 2021, two key changes to this strategy were implemented:
- Over the lifetime of the strategy, members will be invested in more ‘growth assets’ (like shares and property) and for longer. Generally, growth assets perform better over the long term, so it makes sense to have a large part of your super invested in them, especially in the earlier stages of your working life while you build up your nest egg.
- Members will also move to more ‘defensive assets’ (like bonds and cash) in smaller amounts and more often once they reach age 51. This is an important change as your super won’t automatically make sharp and sizeable shifts throughout your working life from one investment option to another, which helps reduce ‘sequencing risk’.
We’ve made these changes because we expect them to increase investment exposure to growth assets for longer, reduce the risks associated with switching from one investment option to another in large steps and, most importantly, improve retirement outcomes for members.
Sequencing risk explained
When investing, the general rule is that as the potential for a high return increases, the risk of loss also becomes greater. This is known as the ‘risk / return relationship’. When choosing where to invest your super you need to strike a balance between the risk you’re comfortable with and the rate of return you need to achieve your retirement goal. Sequencing risk refers to the risk of experiencing a poor investment performance at an unfavourable time. As members’ super balances are usually highest in the few years prior to retirement, at a point when there’s limited time to catch up again after a negative impact, the sequencing risk is greatest near retirement. One way to reduce this risk is to increase your exposure to ‘defensive assets’ as you grow older, which generally have fewer ups and downs than ‘growth assets’.
Other good news
Did you know? We also reduced our fees on Thursday, 25 March 2021. The fixed administration fee members are charged has reduced from $104 to $52 per year. This means, a 30 year old will have saved an extra $1,924 in fees, creating an additional $5,601 in their super balance at age 67^. As you can see, saving now with less administration fees makes a difference over the long term!
Check out this factsheet
for more information about the Lifecycle Investment Strategy. If you have any questions or would like to make an appointment with Mine Super Financial Advice, please, call us on 13 64 63, Monday to Friday, 8am to 6pm or email firstname.lastname@example.org
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* There are no changes to how the investment options are invested and their investment return objectives, which are reviewed on an ongoing basis in line with our standard review process. As some members moved into a different investment option and / or investment mix, the associated investment fees and indirect costs may change.
^ This calculation assumes a 5% annual investment return compounded over the period and does not factor in individual circumstances such as salary, personal contributions or other fees and costs associated with holding a super account. Source: Moneysmart.gov.au