Retirement is a pretty abstract concept for most people until it’s upon us. Yet there are some decisions we all commonly make that can unintentionally reduce our sustainable retirement income. How does CSC help you overcome these?
Retirement looks different to everyone. Whether it is spending more time with family, travelling, learning a new skill, starting a new business, or simply having more time to relax and enjoy life, most of us will hope to retire comfortably with a level of income that funds our preferred lifestyle.
There are things that we can do to make sure we’re getting the most out of our retirement savings. However, decisions we make about our super today can often be influenced by our own unconscious biases. Richard Thaler, Nobel Memorial Prize winner in behavioural economics discussed some of the predictably irrational ways people behave at a recent global investors’ panel[1] with CSC’s CIO, Alison Tarditi. For example:
- The status quo bias. Despite having compulsory super, there seems to be a trend in apathy when it comes to saving for retirement. We see this in the statistic that only 12% of Australians have actually exercised choice in their investment options.
- The bias toward disposable income. An attitude of ‘spend for now’ rather than ‘save for later’ is particularly erosive in the early phases of accumulation, because at that stage contributions matter a lot more to building a balance than investment returns.
- Bias in regret towards loss, rather than opportunity cost. Investing in super is a long-game, and just like any investment it comes with risk. But, loss aversion can lead to less wealth accumulation than risk appetite, or the capacity to take risk, would suggest.
These common biases in decision-making may not always be in our best interest in the long-run. This is why our investment philosophy at CSC takes these biases into account—when we make decisions about investment, we make them with you, our customers, in mind.
Our investment approach is based on a number of principles, which include:
- Importance of product design. Our investment objectives reflect your needs. They are built to ensure that you have the highest probability of achieving a comfortable retirement income, taking into account retirement needs, cost of living, including health costs, risk appetites and circumstances.
- Investing for the long-term. We acquire high-quality assets, with sustainable growth potential, when they are available at fair or better-than-fair prices. We actively manage these assets on your behalf, taking pro-active decisions to ensure that the assets remain of high quality and, where possible, improve over time.
- Take rewarded risk. Our investment governance processes and risk management are world-class. These are essential to support real-time decision making and innovation.
For example, these principles have supported our capacity to directly invest in the most appealing parts of the capital structure of windfarms, data centres and hospitals. They have enabled us to secure sole ownership of high-quality properties; manage their operation efficiently and to the highest ESG standards; and re-invest in their capacity so that they can continue to deliver strong, reliable returns. Our team assesses all risks—financial, environmental, social, governance, technological, and regulatory risks —in an integrated way, and applies independent due-diligence to each investment.
As a result of our long-term investment strategy, we’ve achieved consistently strong retirement outcomes across all of our options.
Our approach in our Balanced fund option is differentiated from that of other providers because it reflects the characteristics of our member base, not the general Australian population. As a result, we expect that our balanced option will incur a smaller loss in value than peer funds, when markets fall. It will also capture less of the upside in markets, as they become increasingly driven by sentiment and herd mentality rather than fundamentals. This pattern has been consistent in our balanced fund, where we have avoided 44% of the downside in markets (excluding the GFC) but still capture around 89% of the upside over the past 14 years to 30 June 2019.
In this way, over the time-frames that matter to our customers, our wealth accumulation is very competitive and our customers are less vulnerable to the state of financial markets regardless of when they time their retirement. Most recently, our customers received much stronger returns over the troubled market period of the six months to December 2018. This resulted in an annual return that was in the top 10 of those achieved by any Balanced super fund. And importantly, CSC’s Balanced fund is consistently ranked in the top quartile of peers over long horizons when comparisons take into account the amount of risk that members’ are exposed to.
Whether it be actively choosing your investment option, making additional contributions, using our online interactive retirement calculator, or attending one of our retirement seminars, CSC is committed to ensuring you, our customers, have the information you need to retire comfortably.
