Super bounces back for first time in 2022

Superannuation returns were up in March, reversing two weak months of returns at the start of the year. But some experts say inflation may be about to bite your super hard.

Figures from SuperRatings show the median balanced super option rose by 1.1 per cent in March, taking the return in the financial year to March to 2.4 per cent. Returns in January and February were -2.2 per cent and -1 per cent respectively. The annualised compound return for the three years to 31 March is 7.5 per cent.

A fund with $50,000 invested in the balanced option increased by $500 over March and by $1200 over the nine months to 31 March. SuperRatings found that funds in pension mode had performed better than those in accumulation mode.

SuperRatings executive director Kirby Rappell welcomed the March return.

Read: Use concessional contributions to grow your super faster

“It is pleasing to see performance recover over the month, as we head towards the end of the financial year,” he says.

“I’ve said it before and I will say it again, it is important to focus on the long term when it comes to your superannuation. The rebound in performance over the March period reinforces this.

“If a member had switched when they saw performance fall in February, they would have locked in the loss instead of benefitting from the recovery we have now seen.”

While super has improved, the spectre of inflation looms over all parts of the economy.

Read: Australian super funds that earnt a AAA rating

The Reserve Bank of Australia (RBA) is keeping the official cash rate at 0.1 per cent for now, citing ongoing inflationary pressure due to fallout from the war in Ukraine and its effects on energy supplies.

But this is expected to change soon, as raising rates is a key method of fighting inflation. When interest rates rise, this tends to have a negative effect on stock markets. When stock markets are down, the super fund returns are also generally down.

Mr Rappell says even with an interest rate rise on the way, the sector is still expected to end the financial year in positive territory but nothing like the oversized returns of 2020 and 2021.

Read: Inflation good news for older Aussies – or is it?

“We are currently on track to end the 2022 financial year in positive territory, depending on how investment markets perform over the June quarter, though performance will be far more muted than that observed in FY2021,” he says.

“While it is pleasing to see performance recover over the month of March, superannuation should be viewed with a long term lens as there will be ups and downs over shorter term periods.”

Nine finance commentator John Collett says that with just over two months before the end of the financial year, it’s hard to see how super fund returns for 2021-22 will achieve more than 5 per cent.

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Brad Lockyer
Brad Lockyer
Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.
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