Superannuation member statements need less focus on past performance
Short term reporting and past performance of the future benefits of a superannuation fund encourages unnecessary knee-jerk reactions from members, according to a new white paper from software provider Provisio Technologies.
The report, entitled 'Past vs future in super statement: Focus on retirement, not last year', found that by focusing on the results of the previous 12 months, member statements provide Australians with "little idea" of what their compulsory savings might achieve in the form of retirement income.
A single year's performance has little or no lasting effect on a 30-year-plus investment plan, the report stated.
"We think it's time that all superannuation funds provide members with constructive information, taking into account all of the variables, on the retirement income that can be expected," Provisio director Cameron O'Sullivan said.
Included in the white paper is a case study that maps the effects of short-term market fluctuations on the retirement income for an average 45- or 65-year old.
The study was based on findings from an October report by SuperRatings, which revealed that between 30 June and 30 September 2011, balanced investment funds lost $5,000 for every $100,000 invested in the fund.
According to Provisio, a person aged 45 with a balanced fund of $100,000 would have dropped to $95,000 based on the 5 per cent drop.
The impact on their retirement income at age 65 is a reduction from $36,500 per annum to $36,000 per annum, or less than $10 a week.
Comparing expected to desired retirement income will give funds and advisers an offering that investors will be engaged with and change the way they see their advice provider, the report stated.
"To make it real and give investors something tangible, to get them interested in their superannuation, you have to look ahead to what these savings might achieve," O'Sullivan said.
Recommended for you
Shaw and Partners has merged with Sydney wealth manager Kennedy Partners Wealth, while Ord Minnett has hired a private wealth adviser from Morgan Stanley.
Australian investors are more confident than their APAC peers in reaching their financial goals and are targeting annual gains of more than 10 per cent, according to Fidelity.
Digital advice tools are on the rise, but licensees will need to ensure they still meet adviser obligations or potentially risk a class action if clients lose money from a rogue algorithm.
Zenith Investment Partners has lost its head of portfolio solutions Steven Tang after 17 years with the firm, the latest in a series of senior exits from the research house.
