Defined benefit investors validated

Super fund members are being turned off accumulation accounts in favour of defined benefit accounts as a result of the negative investment environment.

According to Equipsuper chief executive Robin Burns, market volatility and negative returns have removed the temptation for super fund members to switch from defined benefit accounts into accumulation funds, reversing the trend of previous years.

“In the heady days of 20 per cent plus returns from equity markets, some defined benefit members felt they might be missing out, but the experience of the past 12 months appears to have convinced them that they’re actually on a good thing,” he said.

However, those defined benefit members who are now ready to retire, or who had just started an allocated pension, were finding the current investment climate challenging, as these members had become much more closely engaged with their super.

Burns said this closer engagement could become “one of the more challenging aspects” of the superannuation business, with an increasing proportion of members moving from the accumulation to de-cumulation phase.

“The greater number of retired members interacting with us more regularly will increase pressure on pro-active engagement, transaction systems development and, most of all, responsiveness to changing market dynamics and demands.”

Burns said that as a result, those funds accustomed to ‘arm’s length’ engagement with members must change their internal culture.

Defined benefits account for more than 40 per cent of Equipsuper’s funds under management.