Australian superannuation members may face a significant opportunity cost at retirement depending on how their super funds manage investments, according to recent analysis. While many funds continue to provide a single default investment strategy, typically a balanced portfolio, a growing number of providers are adopting lifecycle investment options that adjust asset allocation according to members’ ages.
Data from the Australian Prudential Regulation Authority (APRA) indicates that out of 42 major superannuation funds, 17 now offer a lifecycle approach as their default MySuper product. These lifecycle options typically allocate more funds to higher-growth, higher-risk assets such as shares and property when members are younger, gradually shifting towards more conservative investments like bonds and cash as members age.
New modelling by Aware Super highlights the potential long-term benefits of lifecycle investing. For a typical 35-year-old with a median MySuper balance of $89,000, remaining in a balanced fund is projected to grow to about $867,000 by retirement. In contrast, a lifecycle strategy could increase this balance to approximately $1.095 million—representing a difference of nearly $230,000.
Michael Winchester, head of investment strategy at Aware Super, cited research from Chant West showing lifecycle funds outperformed single-option MySuper funds by an average of 0.5 percentage points annually over the past decade. "If evidence continues to show that lifecycle strategies deliver better retirement outcomes for members, we expect they will become increasingly common across the industry," he said.
Proponents of single balanced default funds argue these strategies offer simplicity, lower costs, and help avoid the risk of shifting members into more conservative investments during market downturns—a timing error that could lock in losses. However, lifecycle fund advocates emphasize that balanced funds often allocate up to 30% to conservative assets throughout members’ careers, potentially limiting growth for younger members who have a longer investment horizon and can withstand market volatility.
Winchester noted that younger members in their 20s, 30s, and 40s stand to benefit most from maintaining higher exposure to growth assets since they have the capacity to recover from downturns over time. Lifecycle products aim to capitalize on this by gradually adjusting asset allocation as members age.
Lifecycle investing is predominantly offered by retail super funds such as AMP, Mercer, and Vanguard, although some industry funds including Aware Super and ART have adopted it as their default. Large industry funds like AustralianSuper, Hostplus, REST, UniSuper, Hesta, and Cbus continue to rely on single default strategies.
Asset allocations vary between lifecycle products. For example, Aware Super maintains an 88% allocation to growth assets for members until age 56, reducing it to 59% after age 65. Vanguard’s lifecycle MySuper product allocates 90% to growth assets until age 47, then gradually shifts to 40% growth by age 82.
Vanguard Asia Pacific’s chief investment officer Duncan Burns highlighted that individuals at different career stages have distinct investment needs. He said lifecycle funds address this by automatically adjusting risk exposure over time, helping younger members avoid overly conservative allocations that limit growth potential and older members from taking excessive risk close to retirement, when stability tends to be more important.