Super funds set to finish the year down but far from out

Super funds have proven resilient to the turmoil that hit markets in the wake of the pandemic.

Super down but not out

Super funds have proven resilient to the turmoil that hit markets in the wake of the COVID-19 outbreak, extending their recovery through May and early June, and are on track to finish the 201920 financial year down but far from out.

According to estimates from leading research house SuperRatings, the median balanced option rose 2.1 per cent in May, driven by a strong rise in share markets on the back of better-than-expected economic news and the beginning of a staged reopening of the economy.

Based on current estimates, the financial year-to-date return for the median balanced option at the end of May is -1.6 per cent.

If super funds do end 30 June in the red, it will be the fourth negative financial year for super since its inception in 1992, but also likely the mildest.

SuperRatings executive director Kirby Rappell said while the forecasts were looking much better, investors were not out of the woods yet.

“Super members have benefitted from recent gains, but markets are still under pressure and remain vulnerable to negative news, including a potential second wave of COVID-19 infections,” Mr Rappell explained.

“Funds were hit hard in February and March, and some saw that as an opportunity to raise questions about the value of super.

“Since then we’ve had two strong months and the critics have certainly been quieter, but we know there’s a long way to go before super balances return to a more stable footing.”

Since the start of 2020 to the end of May, the median balanced option fell an estimated 5.7 per cent, with the 12-month return holding in positive territory at 0.5 per cent.

In contrast, Australian shares, measured by the S&P/ASX 200 Index, fell 13.9 per cent over the calendar year to May and are down 10.0 per cent over 12 months.

The median growth option, which generally has a higher exposure to shares and other risk assets, is down an estimated 6.8 per cent in 2020 and is up 0.5 per cent over 12 months, while the capital stable option fell only 2.1 per cent since the start of 2020 and rose an estimated 1.2 per cent over 12 months.

Pension returns have held up slightly better, with the median balanced pension option down an estimated 6.1 per cent since the start of 2020, the median growth option down 7.4 per cent, and the median capital stable option down 2.3 per cent.

Mr Rappell explained that members should expect to see their super balance move around as markets deal with the significant uncertainty surrounding COVID-19, however members in well-diversified options will feel the bumps less.

“Things are changing quickly, but there are certainly some early positive signs with businesses reopening and beginning to scale back up,” said Mr Rappell.

“Full recovery may take some time, but funds are well equipped to manage the short-term risks and position themselves for future growth once we start returning to normal.

“Super members may understandably feel disillusioned after watching their balances go down through February and March,” said Mr Rappell. “But super is a long-term game, and members should be cognisant of the steady gains super has delivered over a long period of time and will continue to deliver into the future.”

Are you satisfied with how your super fund has held up during the pandemic? Do you think we will see a second wave of COVID-19 in Australia, which could send things into another downturn?

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    COMMENTS

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    AJ
    16th Jun 2020
    12:19pm
    I have lost a lot of my Super which is my pension fund. Changed it to cash after losing lots but not sure when to change it back again as I cannot afford to lose more.
    AJ
    16th Jun 2020
    12:19pm
    I have lost a lot of my Super which is my pension fund. Changed it to cash after losing lots but not sure when to change it back again as I cannot afford to lose more.
    Eddy
    16th Jun 2020
    1:08pm
    My wife's small superannuation (still in accumulation phase) has lost about 4.5% since 1 Jan 20. However in the 12 months since Jun 19 it has gained by about 1.4%, not much better than a term deposit but at least still in the black. I expect superannuation will improve in the short term once the virus problem abates. We were never tempted to cash out.
    Mez
    16th Jun 2020
    1:20pm
    Am with an industry fund that is performing well all year at about 11%!
    David
    16th Jun 2020
    5:04pm
    We are SFR’s in a well recognised industry super fund and have watched with dismay as our respective balances have been smashed (down some 8+%). Did pick up slightly & once again those gains have been lost. Volatile market indeed & there seems to be no end to this roller coaster ride. We have signicantly reduced our withdrawals & have resorted to living off of our savings. No help from the Feds whatsoever. We are, like many others in this ‘dead zone’, not enough to be eligible for a part pension & not ‘wealthy’ either. Most unfair that us SFR’s are expected to rely on ourselves after years of paying taxes etc & get nothing in return. The system is flawed & needs a comprehensive review to make it fairer for all retirees.
    Blossom
    24th Jun 2020
    1:16am
    Basically I feel people who struggle and put as much as they can in Super are being hit hard.
    In that respect I feel we are not encouraged to save in other ways either. We pay tax on our wages, then on the interest we get on our bank account. + GST and we are paying 3 lots from our salary.
    You get no Centrelink or other assistance, you pay more for medications and many health professionals charge large gaps if you are not a pensioner or have a low Income Health Card you pay a lot more for your medications.
    Mrt
    16th Jun 2020
    6:50pm
    Well done Mez if you have averaged 11% I might have to employ you as my financial advisor
    Circum
    16th Jun 2020
    9:22pm
    Not overly happy with my super returns.I switched from growth to stable about two years ago and currently am down for the financial year,It annoys me hearing about how super is a long term game.It is a worthless comment people pull out when the market is down,I have been in super almost 50 years,if that is not long enough for a game then when is?The cards are in your hands It is up to you to play on or call as you see fit.
    Circum
    16th Jun 2020
    9:22pm
    Not overly happy with my super returns.I switched from growth to stable about two years ago and currently am down for the financial year,It annoys me hearing about how super is a long term game.It is a worthless comment people pull out when the market is down,I have been in super almost 50 years,if that is not long enough for a game then when is?The cards are in your hands It is up to you to play on or call as you see fit.
    Alan
    17th Jun 2020
    1:08am
    I lost the gains made this year. When I consider the payments made to me from the fund and the cost of operatingit, on a year to year basis I am still in front. Obviously on paper I am significantly behind where I was in February at the peak. I have large cash reserves that mean that I do not need to take more than the minimum requirement each year and for 2020/2021 will take that amount late in the financial year. Rule number one in any emergency is do not panic - the same rule applies to super. The result is that I am still OK.
    Priscilla
    17th Jun 2020
    9:53am
    My super fund is happy to charge fees but sadly is not interested in customer service. It is a busy time for them but feel they are treating members worse than Centrelink. Made a phone call to get a form but after waiting a long time on the phone decided to try again to see if I could get through a bit quicker. It took more than 1/2 hour for someone to speak to me and it was decided I would go and see them instead. When I got to GESB the receptionist put me on the phone to speak to someone, even though I was in the building! Needless to see I had a long wait to speak to someone who was surprised to find I was actually in the building. What is the world coming to. Happy to take our fees but not give service.


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