October 18, 2019 in Investment

Trustees must make a decision about whether a single diversified option or a life cycle approach is more appropriate for their members.

Generally, a single diversified strategy offers a “balanced” approach to investing, with around 60 to 70 per cent of contributions in growth assets, such as property and shares, and around 30 to 40 per cent in “defensive” assets, such as cash and fixed interest.

With this approach members are exposed to higher growth assets and, theoretically, higher returns throughout their working life.

The advantage of this strategy is that those who have smaller account balances or have a long time until they retire may end up with more in their pocket. The downside is the more exposure you have to higher risk assets, the more vulnerable you are to a severe market downturn. This is especially the case for older workers. At the same time, many employees are comfortable with higher risk throughout their working life, if it means the possibility of higher returns.  

Around 80 per cent of Australians have their superannuation invested in this option.  

A lifecycle investment approach

By contrast, superannuation funds that offer a lifecycle investment strategy shift contributions from higher risk, growth investments when members are young, to lower risk investments when they are older.

Workers do not need to make changes in their fund strategy themselves. All changes are made automatically, by their superannuation fund, as employees get closer to retirement age.

For example, when employees are under 40, between 70 and 85 per cent of their money may be invested in higher growth—and higher risk—investments but, between 55 and 64 years of age, less than 55 per cent of contributions may exposed to the same market forces.

The idea of course is that, when employees are young, their super fund can handle more market volatility; it has time to ride the ups and downs of the financial markets.

However, as employees get older, they may become more risk averse, seeking to protect the money they have built up over their working life. A lifecycle investment strategy  aims to protect savings as employees age.

Even with a lifecycle strategy, some funds now offer the ability to maintain or increase risk and, theoretically, increase return on investment, at every life stage.

For example, QSuper considers both age and superannuation balance in their lifecycle products.  

Choices based on knowledge

Clearly the onus is on the trustee to establish what strategy will provide their members  with the best, long-term result.

ASIC’s retirement planning tool allows workers to compare how varying returns will ultimately affect their superannuation balance.


This is part 1 of our 2 part series on lifecycle products. You can read part 2 here >

One type of investment is called a single diversified investment strategy. Generally, this strategy offers a “balanced” approach to investing, with around 60 to 70 per cent of contributions in growth assets, such as property and shares, and around 30 to 40 per cent in “defensive” assets, such as cash and fixed interest.

With this approach members are exposed to higher growth assets and, theoretically, higher returns throughout their working life.

The advantage of this strategy is that those who have smaller account balances or have a long time until they retire may end up with more in their pocket. The downside is the more exposure you have to higher risk assets, the more vulnerable you are to a severe market downturn. This is especially the case for older workers. At the same time, many employees are comfortable with higher risk throughout their working life, if it means the possibility of higher returns.  

Around 80 per cent of Australians have their superannuation invested in this option.  

A lifecycle investment approach

By contrast, superannuation funds that offer a lifecycle investment strategy shift contributions from higher risk, growth investments when members are young, to lower risk investments when they are older.

Workers do not need to make changes in their fund strategy themselves. All changes are made automatically, by their superannuation fund, as employees get closer to retirement age.

For example, when employees are under 40, between 70 and 85 per cent of their money may be invested in higher growth—and higher risk—investments but, between 55 and 64 years of age, less than 55 per cent of contributions may exposed to the same market forces.

The idea of course is that, when employees are young, their super fund can handle more market volatility; it has time to ride the ups and downs of the financial markets.

However, as employees get older, they may become more risk averse, seeking to protect the money they have built up over their working life. A lifecycle investment strategy  aims to protect savings as employees age.

Even with a lifecycle strategy, some funds now offer the ability to maintain or increase risk and, theoretically, increase return on investment, at every life stage.

For example, QSuper considers both age and superannuation balance in their lifecycle products.  

Choices based on knowledge

Clearly the onus is on the trustee to establish what strategy will provide their members  with the best, long-term result.

ASIC’s retirement planning tool allows workers to compare how varying returns will ultimately affect their superannuation balance.


This is part 1 of our 2 part series on lifecycle products published by AIST’s Super Talk You can read part 2 here >


Helen Hawkes

Helen is a content producer and who writes wellness and business content for newspapers, magazines and digital sites and helps clients with their content strategy. She also wellness consultantes private clients about a healthy diet, how to lose weight, how to overcome anxiety, how to cope with stress, how to get more sleep and how to improve general health.

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