Lifecycle the future of pensions globally: MercerBY JAMES FERNYHOUGH | FRIDAY, 24 JAN 2014 12:40PMLifecycle strategies are the future of both retail and industry superannuation, despite the latter so far favouring the static strategic asset allocation (SAA) for their MySuper options, according to Mercer senior partner Graeme Mather. Related News |
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Statistics show here and in the US that there is a 50% chance of one member of a couple currently aged 65 living until 90 and 22% until 95 the idea of having the majority of assets in Cash &/or Fixed Interest from around age 60 will guarantee they will run out of money before they run out of life ! They must therefore have the greater proportion of their assets in the growth sector.
I agree when in the pension stage they need sufficient of between 1-2 years required income in Cash and F/I in case of similar volatility as we experienced in the last few years. We are talking about 25-30 years investment horizon for these clients so just think what inflation has done in the last 25-30 years.
By investing the majority of their assets in the growth sectors in both the accumulation and income stages we are giving them Purchasing Power Insurance
Graeme is right on the mark. Once trustees run their default funds demographics against a lifecycle mark 2 product (using factors beyond just age - such as projected retirement balance), they will find better long run returns and lower volatility as members age.