Millions of dollars have been shaved from superannuation accounts this month as shares continued a freefall that began at the start of September.
Balanced super funds invest heavily in shares, so any slide in their value means pension nest eggs also lose value.
The ABC reported this morning that when Australian shares began trading today, they lost all of the gains made this year as our market mimicked massive losses on Wall St overnight.
At the start of September, the stock exchange’s barometer, the ASX-200 index, was hovering around 6350 points. At the start of this month the index was about 6170 points. Yesterday, it slipped down below 5800 points at least twice during trading.
For an average super account, the sell-off is equal to the cost of a short holiday at a cheap overseas destination.
The falling values are affecting both Australian and international shares, with geo-political fears largely to blame.
In particular, investors have become nervous about the potential for a rift to grow between the US and Saudi Arabia over the disappearance of a US-based Saudi journalist in Turkey last week.
Agency SuperRatings estimates that in October, the median balanced fund will have fallen by around 2.4 per cent.
“This means that if you have a super balance of $100,000, from 1 October to 19 October your nest egg would have reduced in value by $2400,” SuperRatings executive director Kirby Rappell told YourLifeChoices.
“If you were invested 90 per cent in Australian and international shares the impact would have been a decrease in value of about $4000.”
Add those figures to the thousands lost during September’s stockmarket tumbles and one could be excused for worrying about their pension savings.
But Mr Rappell said people should not panic …
“When there is a market drop, the balance of your superannuation can fall; however, it isn’t expected to affect most members directly as they cannot access their super,” he said.
“Although it is more challenging for those members nearing or in retirement.”
He said: “Those years away from retiring should take comfort in the fact that the median balanced fund generated a return of 9.7 per cent over the year to 30 September 2018, and 7.2 per cent over the 10 years to 30 September 2018.
“For most members, it is important to keep a long-term view as volatility is unavoidable.
“Timing markets is a fraught exercise and one to be extremely cautious of.
“We do not believe that recent selling will translate into a bear market for shares, but it certainly presents a clear message to super funds and other investment managers to be wary of holding too much risk.
“The market pullback is another timely reminder to members that good times should not be taken for granted.
“These sort of market moves will inevitably impact superannuation account balances in the short term.
“The challenge for super funds in this environment will be to maintain discipline and stick to their long-term investment strategy,” he said.
Yet the fact remains that, according to SuperRatings’ own calculations, the median balanced option went into negative territory in September, returning -0.1 per cent, and will likely do so also October if investors keep selling off their stocks.
Are you nearing retirement and concerned about the fall in the value of your superannuation? Is your super invested in a balanced portfolio?
How does your Super affect your overall retirement income? The RetirePlanner™ tool has all the information you need.
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