Average superannuation returns bounced back in November, following three consecutive months of negative returns and continuing their rollercoaster ride through the financial year.
After recording a slight dip in October (down 1.6 per cent), the median balanced super fund option is expected to return 3.1 per cent for November, according to SuperRatings.
The ratings house says the positive outlook has been primarily driven by expectations that inflation would reach its peak during this period and, in turn, produce large stock market gains.
The median capital stable option returned a more modest, but still positive, 2 per cent due to the fact those options have less exposure to share markets.
And inflation still appears to be rising, albeit at a slower pace than a year ago. The latest monthly Consumer Price Index (CPI) figures showed the indicator rose 4.9 per cent in October, down from 5.6 per cent in September. Both are down significantly on the 7.8 per cent inflation rate recorded in the December 2022 quarter.
Accordingly, the Reserve Bank of Australia (RBA) has paused the official interest rate for now at 4.35 per cent. Its next meeting is in February.
Kirby Rappell, executive director at SuperRatings, says superannuation’s bounce back has come in spite of turbulence in the wider economy.
“Despite the uncertainties around inflation, markets and rates, we have seen funds recording strong returns into Christmas,” he says.
Pension returns also perform well
Pension returns also benefitted from rising share prices and rates, with the median balanced pension options estimated to return 3.4 per cent for the month.
The median growth option is expected to record a gain of 3.9 per cent and the median capital stable option should deliver 2.3 per cent
Financial and calendar years so far
The size of the gains in November should be enough in most cases to offset losses in previous months and lead to a modest return at the halfway point of the financial year. SuperRatings estimates the median balanced super fund should return around 1 per cent for that period.
And it seems the previous quarter’s negativity shouldn’t impact calendar year returns for 2023 too severely. The median balanced option is on track to deliver an average 6.8 per cent return for the first 11 months of the year.
Mr Rappell says early indicators for the month of December are that share market returns may not be as high, which may end up tempering members’ final returns for 2023.
“December has been more mixed for shares so far, however there is still potential for a Santa rally in the second half of the month, and we encourage members to remain focused on their long-term outcomes.”
Mr Rappell says he doesn’t believe inflation has reached its full peak yet, and it will still remain a strong influence over superannuation returns in the new year.
“We continue to believe that inflation will be a strong driver of markets in 2024, coupled with softening consumer demand; however, most members should remain reassured by super funds’ ability to navigate the range of market conditions we’ve seen over the past few years,” he says.
How did your super fund perform in November? Are you on track to end the year in positive territory? Let us know in the comments section below.
Also read: Top super fund performers for 2023