03.Protect your super
Cooper’s message is that Australians in the retirement risk zone should move more assets into investments that return, say, six per cent a year instead of the eight or nine per cent the share markets can offer when times are good.
Playing it safe means reallocating toward fixed-interest products such as bonds or term deposits. But switching may not be easy. “When you’re in a fund you’re more or less beholden to what the fund manager is doing,” Cooper says. He recommends talking to a trusted financial adviser.
Cooper is currently chairman of the retirement income division of Challenger, an investment management firm specialising in “guaranteed return products”.
The firm ran a marketing campaign late last year promising to future-proof retirement accounts by shifting allocations away from shares in favour of annuities. It mainly targeted self-managed super accounts and retirees, but Cooper says it’s always a good time to protect your assets, especially if share markets appear to be on the brink of meltdown.
Cooper maintains that super fund members of any age can benefit from parking their money in safer havens during risky times, but such a move requires a hands-on approach. At a minimum, review the level of risk in your account and discuss safer options with your fund manager, whether or not you decide it’s time to reduce risk.
Hopes for MySuper
Cooper sees the potential for positive change in the Australian superannuation system with the introduction of new MySuper accounts in July next year. If the default accounts are designed as they should be, he says “you will be automatically de-risked when you reach the retirement risk zone”.
But the prospect of upheaval in the super industry remains iffy. It’s a gargantuan beast that’s mightily resistant to change, Cooper maintains, and government can’t press any magic buttons. “There’s going to have to be some profound rethinking of a system that’s remained virtually unchanged in its approach to risk since its inception.”
Despite the lessons of the GFC, taking a more conservative investment position at any life stage goes against the grain of conventional wisdom in the super industry, Cooper says. “The whole crowd of professional opinion would be against it.”