The appropriateness of default investment options in defined contribution plans : Australian evidence

For participants in defined contribution (DC) plans who refrain from exercising investment choice, plan contributions are invested following the default investment option of their respective plans. Since default investment options of different plans vary widely in terms of their benchmark asset allocation, the most important determinant of investment performance, participants enrolled in these options face significantly different wealth outcomes at retirement. This paper simulates the terminal wealth outcomes under different static asset allocation strategies to evaluate their relative appeal as default investment choice in DC plans. We find that strategies with low or moderate allocation to stocks are consistently outperformed in terms of upside potential of exceeding the participant’s wealth accumulation target at retirement as well as downside risk of falling below that target outcome by aggressive strategies whose allocation to stocks approach 100%. The risk of extremely adverse wealth outcomes for plan participants also does not appear to be very sensitive to asset allocation. Our evidence suggests the appropriateness of strategies heavily tilted towards stocks to be nominated as default investment options in DC plans unless plan providers emphasize predictability of wealth outcomes over adequacy of retirement wealth.

Don’t judge a superannuation default investment option by its name

With the massive decline in savings arising from the Global Financial Crisis (GFC), it is timely to review superannuation fund investment and disclosure strategies in the lead-up to the crisis. Accordingly, this study examines differences among superannuation funds’ default investment options in terms of naming and framing over three years from 2005 to 2007, as presented in product disclosure statements (PDSs). The findings indicate that default options are becoming more alike regardless of their name, and consequently, members may face increasing difficulties in distinguishing between balanced and growth-named default options when comparing them across superannuation funds. Comparability is also likely to be constrained by variations in the framing of default options presented in investment option menus in PDSs. These findings highlight the need for standardisation of default option definitions and disclosures to ensure descriptive accuracy, transparency and comparability.

Default judgment set aside without costs

A recent District Court case is believed to be the first in Queensland in which UCPR r 5 has been used to support the setting aside of a regularly entered default judgment without a costs order.

Default, deadlock and remedies

The primary purpose of this chapter is to examine the effectiveness of common default provisions and the range of common law and equitable remedies available to a joint venture partner in the event of default by a co-venturer. Because of the various joint venture vehicles such as trusts, corporations, partnerships and others, it is proposed to deal only generally with these questions.

Setting aside default judgment - whether judgment regularly or irregularly entered - service under Corporations Act 2001 (Cth) s109X(1) - requirements for affadavit of service

In Hill v Robertson Suspension Systems Pty Ltd [2009] QDC 165 McGill DCJ considered the procedural requirements for the service of originating process on a company, and for proving that service for the purpose of obtaining default judgment.The judge’s views adopt a strict and technical construction of the requirements for an affidavit of service under r 120(1)(b). Though clearly obiter, they may well affect the approach taken on applications to enter or set aside default judgments in the lower courts. Pending further judicial consideration of the issue, it is suggested the prudent course is to ensure that the deponent of an affidavit for service effected under s 109X(1)(a) of the Act deposes not only to the location of the registered office of the company but also, at a minimum, provides the source of that information.

Form prevailing over substance?

The decision of the Court of Appeal in Kellas-Sharpe v PSAL Ltd [2012] QCA 371 considered a not unusual provision in a loan agreement, being a provision whereby a lender agrees to accept a lower or concessional rate of interest in circumstances of prompt payment by the borrower. The loan agreement in question provided for the borrower to pay a standard rate of interest of 7.5% per month. However, if the borrower was not in default, the lender agreed to accept interest at a concessional rate of interest of 4% per month. The issue for determination by the Court of Appeal (McMurdo P, Gotterson JA and Fryberg J) was whether the clause was subject to the equitable jurisdiction to relieve against penalties, and, if so, if the interest rate provision should be treated as a penalty making the interest rate provision void. In mounting this argument, the borrower was seeking to overturn a long line of authority which has repeatedly upheld the semantic distinction between an increase in the rate of interest (which attracts the doctrine concerning penalties) and an incentive to the borrower by way of a reduction in the interest rate for prompt payment (which does not attract the doctrine)...

Asset allocation policy, returns and expenses of superannuation funds : recent evidence based on default options

We examine the asset allocation, returns, and expenses of superannuation funds whose assets are mainly invested in default investment options between 2004 and 2012. A majority of these funds fail to earn returns commensurate with their strategic asset allocation policy. It appears that much of the variation of returns between the funds might be a result of their engaging in significant active management of assets. Our results indicate that returns from active management are negatively related to expenses. We also find strong evidence of economies of scale existing in these superannuation funds across different size categories.

Are lifecycle funds appropriate as default options in participant-directed retirement plans?

The appropriateness of default investment options in participant-directed retirement plans like 401(k) has been in sharp focus given that most participants fail to nominate an investment option to direct their contributions. In United States (US), prior to the Pension Protection Act (PPA) of 2006, plan fiduciaries often selected a money market fund as the default option. Whilst this ‘low risk and low return’ investment option was considered to be a ‘safe’ choice by many fiduciaries who were fearful of litigation risk, it was heavily criticized for resulting in inadequate wealth at retirement, particularly when retirees were living much longer and facing inflation risk (see, for example, Viceira, 2008; Skinner, 2009)...

Default judgment - whether irregular - whether court has residual discretion not to set aside default judgment irregularly entered

In CB Richard Ellis (C) Pty Ltd v Wingate Properties Pty Ltd [2005] QDC 399 McGill DCJ examined whether the court now has a discretion to set aside an irregularly entered default judgment.

Setting aside default judgment - whether applicant must file affidavit providing direct evidence of defence 'on the merits'

In Prus-Butwilowicz v Moxey [2002] QDC 166 the court examined the question whether an applicant for an order setting aside a default judgment was required to file an affidavit providing direct evidence of a defence 'on the merits' and whether the position had changed under the Uniform Civil Procedure Rules 1999 (Qld).

Review of penalties and additional damages : Trade Marks Act 1995

Effective enforcement of intellectual property (IP) rights has become a significant issue due to concerns about the effects of IP infringement, including trade mark counterfeiting. It is an important issue for the Australian Government as IP rights underpin a strong, modern economy. Criminal offences and civil remedies can be an important element of an enforcement regime. This review of penalties and additional damages in the Trade Marks Act 1995 (Cth) (Trade Marks Act) has been prompted by a recommendation made by the Advisory Council on Intellectual Property (ACIP), recent changes to the Copyright Act 1968 (Cth) (Copyright Act) and concerns raised by stakeholders. The purpose of this paper is to elicit comments on options which IP Australia is considering recommending to Government.

Assessing specific deterrence effects of increased speeding penalties using four measures of recidivism

Traffic law enforcement sanctions can impact on road user behaviour through general and specific deterrence mechanisms. The manner in which specific deterrence can influence recidivist behaviour can be conceptualised in different ways. While any reduction in speeding will have road safety benefits, the ways in which a ‘reduction’ is determined deserves greater methodological attention and has implications for countermeasure evaluation more generally. The primary aim of this research was to assess the specific deterrent impact of penalty increases for speeding offences in Queensland, Australia, in 2003 on two cohorts of drivers detected for speeding prior to and after the penalty changes were investigated. Since the literature is relatively silent on how to assess recidivism in the speeding context, the secondary research aim was to contribute to the literature regarding ways to conceptualise and measure specific deterrence in the speeding context. We propose a novel way of operationalising four measures which reflect different ways in which a specific deterrence effect could be conceptualised: (1) the proportion of offenders who re-offended in the follow up period; (2) the overall frequency of re-offending in the follow up period; (3) the length of delay to re-offence among those who re-offended; and (4) the average number of re-offences during the follow up period among those who re-offended. Consistent with expectations, results suggested an absolute deterrent effect of penalty changes, as evidenced by significant reductions in the proportion of drivers who re-offended and the overall frequency of re-offending, although effect sizes were small. Contrary to expectations, however, there was no evidence of a marginal specific deterrent effect among those who re-offended, with a significant reduction in the length of time to re-offence and no significant change in the average number of offences committed. Additional exploratory analyses investigating potential influences of the severity of the index offence, offence history, and method of detection revealed mixed results. Access to additional data from various sources suggested that the main findings were not influenced by changes in speed enforcement activity, public awareness of penalty changes, or driving exposure during the study period. Study limitations and recommendations for future research are discussed with a view to promoting more extensive evaluations of penalty changes and better understanding of how such changes may impact on motorists’ perceptions of enforcement and sanctions, as well as on recidivist behaviour.