Longevity and inflation still a risk under lifecycle

Lifecycle products fail to adequately address the risks that can eat away at members' retirement incomes, according to Rice Warner Actuaries.

It hit out at the concept of lifecycle products as a holistic solution to managing retirement income, as the products assumed members were the same rather than addressing an individual member's needs.

Volatility risk may be at the forefront of trustees' minds and driving the adoption of lifecycle products, Rice Warner said, because the results were reflected in returns and showed up on members' statements.

But member statements were a reflection of the past and did not look forward to the member's retirement, Rice Warner said.

Lifecycle products might deal with volatility but they did not guard against inflation risk and longevity risk, it said.

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"The key to improving retirement outcomes is to manage members' funds up to and throughout retirement," said Rice Warner's chief executive Michael Rice.

Rice Warner's modeling had shown lifecycle products often provided similar returns to the fixed balanced option.

Mark Blair, Rice Warner's head of superannuation, said a typical lifecycle investment option was an asset-only solution up to the point of retirement, while a holistic solution matched a fund's asset and member needs up to and throughout retirement - it was member-centric and advice driven.