Super funds on track for double digits return for 2021

Looking for some early Christmas cheer? It could come from your superannuation and pension returns this year.

Super funds are on track to deliver double digit growth for the 2021 year, according to superannuation research house SuperRatings.

SuperRatings executive director Kirby Rappell made the prediction after October delivered yet another positive month for superannuation on the back of rising confidence in anticipation of lockdowns lifting and the economy opening up further.

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The year-end records seem achievable, especially after the end of the 2020-21 financial year saw Australian super funds post average returns of almost 20 per cent.

“We would normally expect super funds to report annual returns in the order of 6, 7 or 8 per cent,” says Dr Martin Fahy, CEO of the Association of Superannuation Funds of Australia (ASFA).

According to the data from SuperRatings, the median balanced option and the median growth option both grew by 0.7 per cent in October while the median capital stable option returned 0.0 per cent for the month.

Mr Rappell explained that growth in 2021 had been robust with the median balanced option up 11.2 per cent and most super funds delivering well in excess of their objectives.

“(This year) has been a strong year for superannuation, with returns nearly three-and-a-half times those of calendar year 2020 and almost double the yearly average for the past 20 years,” Mr Rappell said.

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Pension returns were also positive in October.

The median balanced pension option returned an estimated 0.7 per cent over the month and 11.7 per cent over the calendar year to date.

The median pension growth option returned an estimated 0.8 per cent and the median capital stable option gained an estimated 0.1 per cent through the month.

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While many super funds look set to end the year on a high, Mr Rappell warned members about the change to superannuation that came into effect from 1 November and why it was more important than ever to check their super performance.

As of 1 November, when an employee has an existing superannuation account, that account will now be ‘stapled’ with them and follow them when they change jobs.

“While this legislation will cut down on members having multiple super accounts, it is really important that members check which fund they are stapled to, to see if its performance stacks up and fees are competitive, as this could have a significant impact on their final retirement account balance,” Mr Rappell said.

AIST chief executive Eva Scheerlinck said that analysis of APRA performance data and the ASIC calculator showed that being stapled to a persistently underperforming fund over a working life, instead of a high-performing fund, could result in an average wage earner retiring with $309,000 less at retirement.

Industry Super Australia CEO Bernie Dean says many people ignore correspondence from their super funds, only to regret the decision years later when they realise they have been in a dud super fund.

“Now the government has put in place a system that prompts people to think about what fund they’re with,” Mr Dean says.

“This letter is probably the most important letter they might receive from their super fund in their whole life – it could mean an extra couple of hundred thousand dollars for many of them when they retire.”

Mr Rappell also suggested that it was important to check whether the insurance cover offered by your stapled superannuation fund was suitable for you.

He explained that one of the benefits of default super accounts being created every time you changed job (the system in place before the 1 November changes) was that the insurance was often tailored to suit each individual workplace.

“If you are unsure what insurance cover is suitable for you, many funds provide insurance needs calculators that can help and also offer advice services,” Mr Rappell explained.

How has your super fund performed this year? Why not share your thoughts in the comments section below?

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