Taking a personal touch to superannuation

26 June 2020

Retirement income adequacy has been a key topic driving debate within the superannuation industry; however, it appears that everyday Australians are less and less engaged.

While we can be certain that the majority, if not all, Australians want a comfortable life in retirement, the majority are not thinking about their retirement until it could be too late.

The outbreak of COVID-19 and its dramatic impact on markets has again thrust Australian super balances into the headlines. 

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Fear around the erosion of Australia’s retirement savings peaked as Chant West figures revealed the average growth (balanced) fund dropped 9% in the month to 31 March, 2020, and 10.1% over the March quarter. The share market has since bounced back however heightened volatility has not alleviated fear altogether. 

Prior to the market collapse, Russell Investments commissioned a survey of more than 3,000 working Australians in January 2020 to gauge their perceptions of investment within superannuation. The research revealed many Australians are in the dark when it comes to the important details of their superannuation. For instance, most working

Australians (67%) believed their superannuation fund would actively protect their retirement savings from a downturn. 

Another common misconception among more than a third of working Australians is the belief that their super fund already manages their investments based on their own personal circumstances – even if they do not actively choose how their super is invested within their fund. 

In fact, two-thirds of those surveyed did not know how their super was invested or simply left it up to their fund’s default approach. 

Perhaps the most concerning takeout from the research is just how much Australians underestimate the importance of asset allocation in driving retirement outcomes. For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy. Yet, just one in five correctly identified asset allocation as one of the most important determinants in achieving adequate superannuation savings for retirement – alongside contributions.

This statistic is concerning however it can hardly be considered surprising with asset allocation often taking a backseat in industry discussion around retirement adequacy compared to other factors such as fees, which have a smaller influence over the overall outcomes.


The misconceptions uncovered in the research can for the most part be explained by Australians’ low engagement when it comes to superannuation. It has shed a light on how exposed many Australians remain in today’s modern defined contribution super environment. 

Our superannuation system is recognised among the best in the world; however, retirement income adequacy continues to be a real conundrum that affects the majority of working Australia – and lack of engagement is exacerbating the issue.

This is not just a current problem, with the same issues likely to be even more pertinent for younger generations as they experience further flat real-income growth and even volatile income as the movement towards the gig economy gains traction. 

According to the World Economic Forum, Australia has a US$1 trillion ($1.4 trillion) retirement savings gap, which is expected to rise to US$9 trillion by 2050. Insufficient savings rates, increased life expectancy and of course, misaligned asset allocations are the biggest drivers of this shortfall. 

Having the right asset allocation at the right time is critical as super fund members who don’t take on enough risk when they are able can see their balances stagnate while overly aggressive asset allocation at the wrong time can jeopardise a lifetime of savings.

However, in an age of personalisation and information technology, most individuals saving for their retirement are defaulted into pooled investment strategies that do not take into account important information such as their account balance and their retirement income goal.

Despite investors being able to choose their investments in super, our research shows choosing investments within super remains a minefield for many working Australians, leading to misinformed choices, or no choices at all. 

In fact, more than one-in-five respondents did not know that choosing investments with superannuation was an option available to them. Furthermore, those who have made active investment choices within their super may be ill-equipped to do so, with only three in 10 members believing they have the right investment experience to pick their own investments. 

When making their investment choices, one in four Australians rely on help from a friend or relative with financial knowledge compared to only three in ten who reference information from their super fund.

Meanwhile, 28% of working Australians admit to still choosing their own investments, despite not having much investment experience. In times of economic crisis such as the current environment, the chances of making an investment mistake are likely to be magnified with strong emotions and behavioural biases present in decision-making.

While professional financial advice can help, it is not realistic that every working Australian can access it. Appropriate asset allocation advice also requires ongoing review and implementation as circumstances change which is heavily reliant on member engagement.


We believe the industry can, and should, be doing more to not only help investors navigate this climate of increased uncertainty but meet the needs of retirees as we live longer. 

We encourage investors to start with a clear set of investment goals and design asset allocation which is specific to achieving those goals, updating them as their needs or circumstances change. 

For many working Australians saving for retirement, the approach is starkly different. A key weakness of our current system is its inability to deliver investment strategies that address individual retirement goals. 

While super funds want to do the best for their members, the current approach to investing is still one-size-fits-many. Until now, it has not been viable to tailor investment strategies to each individual. 

While MySuper has helped nudge people into higher growth default options, the contributions of a 25-year-old entering the workforce might still be invested in the exact same way as a 62-year-old nearing retirement.

The introduction of lifestyle or target date funds has been a step in the right direction, however age-only strategies are designed for a group of individuals, instead of delivering an optimal outcome for each and every individual.

For instance, a 62-year-old well ahead of their goal can afford to invest more aggressively in contrast to a 62-year-old just on track to reach their goal. With an age-only based approach, these different individuals are invested in the exact same way.

Our next challenge is to efficiently deliver an approach to asset allocation that is more personalised to an individual’s own retirement goal and financial situation.


The move towards a more personalised approach to superannuation in Australia would emulate other industries which have harnessed advances in data and technology to offer a more personalised delivery of products and services to meet the unique needs of individuals.

Examples are numerous in our everyday lives – from video streaming services which provide personalised entertainment experiences aligned to their preferences to the rise of fitness smart apps, making it easier to set health goals and track progress. These technologies have proved to be hugely beneficial, showing how tracking progress towards a personal goal can improve the chance of achieving that goal.

We believe industry stakeholders can, and should, draw on similar experiences to address well-documented, longer-term challenges in superannuation such as low levels of engagement. 

Naturally, a more personalised approach to superannuation would make it easier for Australians to engage, take positive action and improve the likelihood of achieving the retirement lifestyle they choose. 

In the next evolution of superannuation, each individual member will understand the retirement income goal they are likely to achieve and receive guidance on how to set a more meaningful goal. Alongside this, super funds will not only make it easier for individuals to measure progress but help them stay on track towards their goal.

Enabling members to adopt more individual, goals-based investment strategies will also help members better manage their investment choices – and thus retirement outcomes – through inevitable market cycles. 

While the investment landscape is still uncertain, one certainty that can be relied upon is retirement savers will demand more of their super funds. As has been the experience with many other industries during this crisis, we expect the pace of change to accelerate, with goals-based, mass personalisation in super funds coming sooner than you might think.  

Jodie Hampshire is managing director, Australia at Russell Investments.

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