November this year marked five years since the S&P/ASX 200 Index reached an all-time high of 6829 points. At the time of writing, the index was still some 35 per cent below its peak. Australian superannuation fund members would not have had nearly as torrid a time of it since the global financial crisis (GFC) had they invested less money in equities.

Jeremy Cooper, chairman of retirement income at Challenger and the chair of the 2012 Review into the governance, efficiency, structure and operation of Australia’s superannuation system – the so-called “Cooper review” – says Australian fund members’ predilection for equities left them far more exposed than their global peers. As a result, the account balances of Australian fund members have been hit harder than the balances of members of funds in other countries – bad news for those close to retirement and those drawing down their “ retirement savings as income.

And recently, the former head of Treasury, Ken Henry, called for super funds to slash equity exposures, particularly for members approaching retirement.

Increasingly, however, investors are turning to equities as a potential source of income. And that puts the asset class in a different light for a significant number of investors.

Peter Thornhill, the founder and principal of Motivated Money, says views such as Henry’s are misguided.

“He, like most other commentators, focuses on share price movements as the justification for suggesting that this bias to shares is too risky for retirees,” Thornhill says.

“As a self-funded retiree, can I respectfully suggest that he pulls his head in.”

Thornhill says his own self- managed super fund lost almost half of its value at its worst, but “our dividend income was nowhere near as badly affected”. “Add to this some old-fashioned prudence – spend less than you earn – and we were relatively unaffected by events at that time,” he says.

“During the worst of the GFC we were offered shares by most of the leading companies as they bolstered their balance sheets. Because we spend less than we earn we were able to pick up CBA shares at $26, Wesfarmers at $13 and the list goes on. Subsequently, the majority of those companies went on to pay an increasing dividend stream.”

Click here to download a full PDF of this Special Report