This PSSap article provides general information only. It has not taken account of your personal objectives, financial situation or needs. Before acting on any general information or advice, you should have regard to your own objectives, financial situation and needs.
Which is the right investment option for you?
We offer four investment options. So which is the right option for you?
- should you pick the option with the highest expected long-term return?
- or should you pick the option with the lowest risk profile?
Our suggestion? We suggest you do something different entirely… we suggest you set an adequate saving target for your super first (if you haven’t already).
Why set an adequate saving target first?
The reason why we suggest you do this before you pick your investment option is you’ll get an approximate dollar figure target to save. That figure should represent a pool of super savings at retirement that can fund a comfortable lifestyle for you.
(We say “approximate” because the level of savings you need to fund a comfortable retirement lifestyle will change in line with fluctuations in your life expectancy, the level of inflation and the rate of earnings on your pool of savings both while you work and in retirement.)
With an approximate saving target in mind, you can then ask…
“What level of investment returns do I need to get over my working life to grow my current balance to my approximate dollar figure saving target?”
Because if your super balance is on a journey over your working life, your saving target is its destination. It’s the place you want your super balance to go.
And once you know where you want your balance to go…
Then you can work out how to get your balance there. Meaning, once you know the amount of super you need to save, you can select the option that is most likely to help you reach that amount.
Because your level of investment returns over your work life is likely to be the major driver of your super balance, along with your level of super contributions.
(To learn how to set an adequate saving target for your super, please read our PSSap super article: How much super do you need to save?)
So which option can grow my balance to my saving target?
To help you answer that question, use our free Retirement Modeller. Our Modeler is an online calculator that can project the possible growth of your PSSap account balance.
Simply enter into our Modeler your:
- salary, and
- current balance.
Then amend your ‘balance at retirement’ figure to be your saving target.
Play around with the ‘investment mix’ (i.e. change the investment option selection) to see the projected difference each option can make to achieving your saving target.
But you may also like to know a little about each option…
Each of our 4 investment options is different
Each option is different because each option has a different return target and different prescribed level of investment risk. To see these differences, view the description of each option:
But first you may want to know:
What is a return target?
A return target is the level of investment performance an option aims to achieve over its set timeframe. For example, the PSSap default option (MySuper Balanced) has a return target of CPI (Consumer Price Index) plus 3.5% per year over a 10 year period.
(Return targets, however, are not a guaranteed return for your super.)
Each option also has a different prescribed level of investment risk.
What is a prescribed level of investment risk?
The prescribed level of risk for each option is the likely variability with which investment returns are generated. For example, MySuper Balanced is prescribed as medium to high risk, meaning negative annual returns are expected in three to four years in any 20 year period. In comparison, the Income Focused option is described as medium to low risk, meaning that negative annual returns are expected in one to two years in any 20 year period.
But if all this talk of ‘return targets’ and ‘investment risk’ means you have more questions than answers, we suggest you consider getting personal financial advice.
Get personal financial advice over the phone
PSSap members can access financial advice through CSC's authorised* financial planners. The financial advisory services offered by our financial planners can include ‘single issue’ advice which involves a financial planner giving personal advice to you over the phone.
This advice is limited to your investment option choice, insurance and contributions.
Learn more about the financial advice services available to you.
* Our authorised financial planners are authorised to provide advice by Guideway Financial Services (ABN 46 156 498 538, AFSL 420367.). Guideway is a licensed financial services business providing CSC financial planners with support to provide members with specialist advice, education and strategies.
Summary – Which option is right for you?
- Think less about the option with the highest target return or the lowest risk. And instead think about how much super you need to save for a comfortable retirement.
- Pick the option that can best help you achieve your saving target
- With your saving target is mind, work out the right option using our free Retirement Modeller and/or asking a financial planner.