Super returns defy virus gloom

Australian superannuation returns have defied coronavirus challenges to deliver their best monthly result since June last year.

April results were up 2.2 per cent, according to industry analyst Rainmaker Information.

“Super fund members worried about their investment returns should take solace that during the Global Financial Crisis (GFC) in 2008-09, returns got as low as -21 per cent at one point,” said Alex Dunnin, executive director of research at Rainmaker Information.

“Results so far during the Corona Financial Crisis (CFC) are nowhere near as deep.”

Returns this financial year are tracking at -4.8 per cent, with rolling 12-month returns at -3.2 per cent.

From 20 April, the federal government enabled those suffering financial hardship due to the coronavirus pandemic to access $20,000 of their super in two allotments. The early release scheme has been the biggest drawdown on superannuation in history.

On 8 May, the Australian Financial Review reported more than 1.2 million Australians had sought to withdraw nearly $10 billion, at an average of $8000. The numbers did not exceed expectations.

The industry is facing scrutiny over its conduct during the pandemic, however.

Tim Wilson, chair of the House of Representatives Standing Committee on Economics, has called an urgent public hearing of the committee based “in large part on ME Bank’s recent conduct around unilaterally changing clients’ mortgage redraw arrangements”.

He is also targeting superannuation funds that are ME Bank shareholders.

“Australians trust superannuation funds with significant savings,” Mr Wilson said. “They hold a fair expectation that funds will provide accurate information and will act promptly if they are eligible for early withdrawal.

“The conduct of Industry Super Australia in publishing dubious calculations about the impacts of early withdrawal will be examined, as will processes to stop fraud.”

Processing of early releases was paused over the weekend after the Australian Federal Police, Austrac, the Tax Office and the Financial Crimes Taskforce announced an investigation into thefts from around 150 super accounts.

Australian Institute of Superannuation Trustees (AIST) chief executive Eva Scheerlinck said super funds were cooperating with investigations.

“Profit-to-member funds have existing, well-developed processes to minimise the risk of fraud, which they have applied since the early release scheme commenced,” she told Nine media.

Labor assistant treasurer Stephen Jones said the super industry had raised concerns about the risk of fraud with the government.

Before the early release scheme commenced, ACCC deputy chair Delia Rickard said: “Scammers are cold-calling people claiming to be from organisations that can help you get early access to your super.

“The Australian Taxation Office is coordinating the early release of super through the MyGov website and there is no need to involve a third party or pay a fee to get access under this scheme.

“Never follow a hyperlink to reach the MyGov website. Instead, you should always type the full name of the website into your browser yourself,” Ms Rickard advised.

No matter the headlines, Australian superannuation remains robust.

“At face value, super funds have fallen less than half as much as the ASX,” said Rainmaker’s Mr Dunnin.

“While this is a scary story for super fund members, it’s also a good story because it shows how their fund’s investment strategies have insulated them from the worst of the share market falls.”

More detailed analysis conducted by Rainmaker of complete super fund investment results to the end of March 2020 shows that the SelectingSuper Index returned 3.4 per cent per annum over three years, 3.9 per cent per annum over five years and 6.3 per cent per annum over 10 years.

Have you made changes to your super or account-based pension accounts in the past few months? Do you plan further changes as we close on the end of the financial year?

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Written by Will Brodie

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