Super slides in May despite heroic performance by Australian shares.
SuperRatings has some good news and some bad news about your super.
Australian shares have posted “a world-beating performance”, it says, but funds have been dragged down by falls in international shares. The overall result in the final stretch of the financial year is a softer performance after a typical balanced option return in May was -0.7 per cent.
Markets have since recovered, but members shouldn’t expect a bumper end to the financial year, SuperRatings says. The year-to-date return is sitting at 5.1 per cent for the median balanced option, which is below the 8.5 per cent per annum return achieved over the past 10 years.
Members in the median growth option, which includes higher weightings to growth assets such as Australian and overseas shares, suffered a larger fall of 1.2 per cent in May, while the median international shares option fell four per cent. The median Australian shares option held firm, returning 1.4 per cent.
“It’s been a disappointing end to the financial year for super, but long-term performance remains robust,” says SuperRatings executive director Kirby Rappell. “The median balanced option return over the past 10 years is around 8.5 per cent, indicating that super has delivered solid returns even in a low interest rate environment.”
The SuperRatings report says that downside risks to the Australian economy, including weak inflation, falling home prices and tighter credit conditions, were taking their toll on consumer confidence, while the US-China trade negotiations had also contributed to market volatility.
Mr Rappell says: “Labor’s negative gearing proposals were thought to favour developers by limiting tax concessions to new stock, but so far the improvement in sentiment has outweighed any negative impact, which may give some super funds a temporary boost to their property portfolios.”
Long-term performance remains strong, according to SuperRatings data. It says $100,000 invested in the median balanced option in May 2009 is estimated to have reached an accumulated $217,391 today.
The median growth option is estimated to be worth $230,873 over the same period, while $100,000 invested in domestic and international shares 10 years ago is now worth $244,382 and $258,181 respectively. In contrast, $100,000 invested in the median cash option 10 years ago would only be worth $129,748.
In other super news, financial planners want the Australian Securities and Investments Commission (ASIC) to be more consistent in the way it views salaried planners employed by industry superannuation funds.
They say that some fund salaried advisers are being paid out of the fund’s administration and investment fees, meaning that all members of the fund are paying for advice whether they receive it or not.
Former Financial Services Council adviser Senator Andrew Bragg says there needs to be better disclosure on the part of all superannuation funds, irrespective of whether they were industry funds or retail funds. Better disclosure and transparency would make it easier for fund members to determine how their fees were being used by their superannuation funds,” he told moneymanagement.com.au.
Are you happy with the performance of your super fund this financial year?
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