Superannuation Strategies

2020/21 to 2023/2024

Considerations in formulating strategy

(2) The trustee of the entity must formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the entity, including, but not limited to, the following:

a. the risk involved in making, holding and realising, and the likely return from, the entity’s investments, having regard to its objectives and expected cash flow requirements;

b. the composition of the entity’s investments as a whole, including the extent to which they are diverse or involve exposure of the entity to risks from inadequate diversification;

c. the liquidity of the entity’s investments, having regard to its expected cash flow requirements:

d. the ability of the entity to discharge its existing and prospective liabilities;

e. for a self-managed superannuation fund – whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.

(3) An investment strategy is taken to be in accordance with subregulation (2) even if it provides for a specified beneficiary or class of beneficiaries to give directions to the trustee where the directions;

a. relate to the strategy to be followed by the trustee in relation to the investment of a particular asset or assets of the entity: and

b. are given in the circumstances covered by regulation 4.02

Have an investment strategy and invest responsibly.

An investment strategy should be unique to the requirements of a particular fund and its members, and should be reviewed regularly and updated as required.

Trustees of self managed super funds are required to prepare and implement an investment strategy for their fund, and regularly review the strategy.  This requirement is to help ensure that the best possible investment decisions are being made for the fund.

The investment strategy must reflect the purpose and circumstances of the fund and consider:

>investing in such a way as to provide sufficient member returns, taking into account the risk associated with the investment

> appropriate diversification and the benefits of investing across a number of asset classes (for example, shares, property, fixed deposit) in a long term investment strategy

> the ability of the fund to pay benefits as members retire and pay other costs incurred by the fund, and

> the needs of members (for example, age, income level, employment pattern and retirement needs).

An appropriate investment strategy should set out the investment objectives of the fund and detail the investment methods the trustees will adopt to achieve these objectives.  It should allow trustees to be able to measure investment performance against their retirement income goals.

Trustees must make sure that all investment decisions are made according to the investment strategy.  If in any doubt, they should seek investment advice or appoint an investment manager in writing.

Do:

> develop an investment strategy and review it regularly

> ensure your investment strategy takes into account your retirement goals

> take into consideration the risks involved in certain investments

> take into consideration what bills the fund has to pay and allow enough cash to meet these expenses            

> take into consideration when benefits will need to be paid out

> consider diversifying the fund’s investments

Don’t

> invest without considering your strategy and your overall goals for retirement