Diversified portfolios can help super last longer

Diversification and growth retirement portfolios on average can last eight years longer than defensive portfolios, according to research by the Association of Superannuation Funds of Australia (ASFA) and State Street Global Advisers (SSgA). 

Retirees with a more diversified portfolio (43 per cent cash/fixed income, 26 per cent Australian equities, 17 per cent  international equities, 10 per cent alternatives, and five per cent property) on average should be expected to draw down on their superannuation until the age of 98. 

However, retirees with a defensive portfolio (75 per cent cast/fixed income and 25 per cent Australian equities) can expect to draw until they are the age of 90, taking into account reliance on age pension contributing to their funds. 

"Growth assets, which will generate sufficient returns to support lifestyle aspirations, outpace inflation and minimise longevity risk are critical, along with some downside risk protection," SSgA's Investment Solutions Group Asia-Pacific head, Mark Wills, said. 

Commenting on possible future policy changes ASFA chief executive, Pauline Vamos, said that the industry needs to develop products that deliver a regular and stable income stream, provide longevity risk management, and are flexible enough to deal with unexpected events. 

"At present, the regulatory framework that governs these products has been overly prescriptive, which has slowed innovation and hindered product development." 

Vamos also noted that pressures on the federal budget along with the fact that we may live longer than we plan means that it is not the best idea to rely on the government to fund retirement, as well as other age-related expenditure.