Men tend to be more active when it comes to changing the settings of their superannuation funds than women, as do superannuants with larger account balances, according to a new research study.
This article is the first in a two-part series examining the findings of an analysis of investment choices made by fund super members. The full analysis will be published in the next issue of JASSA, FINSIA’s Journal of Applied Finance.
This article will highlight some of the behaviours of superannuation fund member choices shared by groups as defined by age, account balance size and gender. Next week’s coverage will highlight how economic events and policy changes have influenced members’ behaviours.
The study is based on data sourced from Mercer (Australia) and the Corporate Division of the Mercer Super Trust (MST) including 177 sub-plans of the MST, representing a broad cross-section of industries and employers with a pooled membership more than 258,113 individuals and up to 10 years of observed behaviour.
The research is conducted by professors, lecturers and research fellows of the Monash Business School: Paul Gerrans, Maria Strydom, Carly Moulang and Jun Feng.
The study, which measures changes in both contribution and balance investment options, finds that men overall make the most changes in both categories.
The study groups changes into the two categories because, it explains, individuals face two important choices which can alter their retirement savings trajectory: whether to make additional savings beyond the employer contributions (whether it be the compulsory level or higher); and whether to change from the default investment strategy for those contributions.
Some superannuants choose to do both — the highest incidents of these are males, members in their 50s, who have been with a fund for more than five years, and have account balances in the top third.
It’s well known super fund members become more active as their account balances grow.
According to the study, 18.9 per cent of those in the top third of balances having made both choices compared with only 1.5 per cent of those in the bottom third having done so.
Also well-known is the fact that super fund members tend to be fairly inactive with their super fund choices as a whole — most remain in the fund’s default option, even though the ability to make an investment strategy choice is available within 68 per cent of funds representing 98 per cent of industry assets, according to APRA data.
More members (14.5 per cent) are likely to make changes to their balance investments compared to their contributions (13.2 per cent), according to the findings of the study, and choices become more likely with older members.
Overall, males are a few percentage points more likely to register balance and contribution investment activity than females, although the data shows females became more involved in balance investment changes around the time of the global financial crisis (a finding that will be further touched on next week).
Existing research in this area suggests women are more risk averse in terms of their investment choices compared to men. This gender difference, however, appears to be mitigated by factors such as income, knowledge and confidence, the study points out.
Research also suggests that gender differences in types of superannuation contributions have been reported between the sexes and that, in later years, women are more likely to accelerate their savings activity compared to that of men.
The Australian superannuation system contains a heterogeneous mix of retirement savers who may have had more than a decade accumulating retirement savings at a rate of 9 per cent or more, and some with two decades of accumulation at the lower and higher rates, the study notes.
Despite this savings culture it’s suggested that only 53 per cent of couples and some 22 per cent of individuals are on track to achieve a sufficient level of retirement income, the study highlights.