Mass-customisation MySuper approach not working

Five years on from the introduction of the MySuper default arrangements, Frontier Advisors has warned that adopting a lifecycle strategy, which account for around 35 per cent of all funds in the market, can come at the cost a potential lower balance at retirement for clients.

Research by the advisory firm suggested that construction of such strategies to have a retirement income focus rather than retirement benefit could result in the same or better member outcomes, while maintain the protection against sequencing risk that is a key appeal of lifecycle options.

The research paper argued that having better defined member cohorts, an increased focus on the post-retirement phase, and varied fees to reflect underlying investment mixes could help achieve this.

“Lifecycle products may well be appropriate for disengaged members, but engaging the members is likely to be an even better outcome,” Frontier’s head of member solutions research, principal consultant David Carruthers said.

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“There is also a risk this perpetuates a low level of engagement for the funds themselves who may well think the job is done at a time when they should be regularly checking in with older members to ensure their strategies are fit for purpose at that stage of life.”