What are the important factors that should be considered by tertiary sector employees when they are deciding whether to place their superannuation in the Defined Benefit Plan or the Investment Choice...

Superannuation Contributions
Course Name
Course Date
Student’s Name
Superannuation and its contribution to defined benefit plan or investment plan
Introduction
The superannuation industry is one of the important industry of and is considered as the most essential part of the three pillar retirement income policy. First pillar is the mandatory contributions and the second pillar is the voluntary contributions. There are different aspects that can be seen in the investment choices of superannuation funds that is done by the employees and the employer. (Australian Bureau of Statistics 2004)
The Australian system of pension plans (known as ‘superannuation’) can be said as a unique (two-tiered) agency setting. It has high impact of governance practices which is used by the government to produce important new insights relevant to the
oad concern of business ethics.
The purpose of a superannuation plan is same as the purpose of the pension plan which focus on providing financial benefits to contributors during retirement. With the help of the superannuation plan, the necessary financial resources are achieved by the way of managed investment of contributions and subsequent distribution (Australian Government, 2008).
Superannuation funds is handled by different companies across Australia with one of the biggest company as Unisper. With this company, the superannuation from all the employees and employer go to this company where it invests in defined benefit plan or investment choice plans.
The Australian government has made it compulsory for all he employees and the employers to make compulsory contributions to the superannuation funds. Some of the major factors that defines the contribution is the age of the employees and the income group of the employees.
Choice of investment:
The choice of investment includes the aspects. Risk is one of the biggest factors that the individual considers when analysing the investment. Investment plan choice can relate to investment in different stocks, bonds, SIPs, mutual funds and other things. (Benartzi, S. and R. H. Thaler,2002)
The investment strategy is the investor’s plan to attach to guide their investment decisions which is based on the goal of the individuals and the company. The aggressive strategy depends on relative weight of high reward and high risk asset classes i.e. equity. For the aggressive strategy, the management needs to be more active to analyse the return timely basis as the portfolio is highly volatile. The company can later rebalance its portfolio to have lesser risk involved in the portfolio. Example: The return of the portfolio including the blue chip stocks has been an average of 15% to 25% over last few years. In the blue chip stocks, the portfolio return can increase or decrease by 10% within a week time.
Both the stocks and bonds has different form of return and has different kind of risk associated with it. Stocks are the equity investment which are generally considered as the risky in nature whereas bonds are...