New Rice Warner research has assessed the current super industry's allocation position, including the issues around equity allocation, concluding that the traditional asset allocation is flawed.
In its April report, Asset Allocation for MySuper, Rice Warner assessed the implications for super funds current asset allocation in light of the upcoming MySuper reforms.
Within this report, Rice Warner identified common flaws that are currently being debated in the industry including the allocation to volatile assets despite the risk portfolio of the member.
"Many members who retired after the GFC were unprepared and they had diminished values at the time they accessed their benefits. A major contributor to this problem has been the asset allocations of those nearing retirement which remained fully committed to default and similar composite portfolios," read the report.
"These portfolios suffered significant falls and in many cases income can now only be generated by realising holdings in these portfolios at depressed values. The challenge for funds in the future is to determine how to better provide for those in and nearing retirement whilst still providing for the bulk of their members who remain in the accumulation phase."
Rice Warner said that while there was no simple approach that will properly deal with every individual member's circumstances, funds can adopt a framework that will improve the lot for all members and provide personalised solutions for those who require them.
The Self Managed Super Fund Professionals' Association (SPAA) said questions about super fund allocations being overweight in equities further supports the benefits of an SMSF.
"There is no 'one size fits all' when it comes to saving for retirement so it is important that individuals have the flexibility to work out the optimal weighting for their portfolio and an SMSF is the only vehicle which gives the investor the autonomy and flexibility to decide when and how to adjust their asset allocations," said Andrea Slattery, SPAA chief executive.
Recent research by SPAA and Russell Investments showed that the proportion of SMSF trustees who believe that equities are too volatile has doubled to 32% this year, up from just 17%.
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