Superannuation – how will 2016 compare to 2015?

Adam Gee gives us a snapshot of superannuation returns in 2015.

A gold superannuation nest egg with investment return graph document

Superannuation is often only interesting when your thoughts turn to retirement, and more importantly, how you’re going to fund it. However, we think it needs to be better understood, and one way to do that is by making it more simple. So we asked Adam Gee, Chief Executive Officer at SuperRatings, to give us a snapshot of superannuation returns in 2015 and what we can expect from funds in the next 12 months.

Last year was a somewhat bumpy ride for superannuation funds, with returns more volatile this year in comparison to previous years. Based on data from SuperRatings, an independent research firm, the return for the 10-months to the end of October 2015 stood at six per cent for superannuation funds’ balanced investment options, which are those that invest between 60 and 76 per cent of their assets in growth investments, such as Australian and overseas shares and property. While November was a reasonable month for investors producing positive returns, the first two weeks of December were challenging: the movement in the Australian and global share markets went downwards, wiping out some of the earlier gains in 2015.

The SuperRatings data also showed that the average account balance across superannuation investors stood at approximately $62,000 in?2015, rising strongly from $55,000 in 2014. This was due to reasonable investment returns and continuing strong contribution levels. During retirement, however, superannuation balances are substantially higher, with the average pension investor account balance sitting at approximately $248,000 – up from $230,000 in the prior year.

With higher account balances in retirement and investment market volatility likely to continue for the foreseeable future, it is especially important for retirees to actively engage with their superannuation fund to monitor the investments selected when in retirement, in order to minimise the potential for losses.

While it remains near impossible to predict the investment returns for 2016, anecdotal evidence suggests that global growth is likely to remain reasonably subdued next year, resulting in the expectations for investment returns to be as relatively low. The majority of superannuation funds target a return of inflation plus three per cent annually in relation to their balanced investment options, which equates to around five – six per cent for the year.

Based on the evidence collected, SuperRatings estimates that this return is likely to be achievable in 2016, but this will obviously depend upon a number of global factors. Only time will tell how accurate this prediction will be!

Adam Gee, Chief Executive Officer, SuperRatings

SuperRatings is an independently owned superannuation research and consulting company providing data analysis, information, consulting services and product benchmarking to the superannuation industry, corporate sector and the general public. SuperRatings prides itself on providing impartial advice to all segments of the market. It actively promotes engagement, education and ownership of superannuation through the provision of a range of research, ratings and consultancy services. Offering the most extensive industry coverage accounting for over $1.2 trillion in funds under management and 22 million member accounts, this allows SuperRatings to understand the various costs, fees, products, services and performance of superannuation funds and benchmark these against the broader market. 





    COMMENTS

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    Cruiser
    28th Jan 2016
    11:54am
    Expecting 3 % return, maybe worse, go with cash, at least the account balance wont move into negative territory
    Anonymous
    28th Jan 2016
    12:37pm
    Most super term deposits are 2.5% or less, but have increased fractionally over the past three months. The rumoured increase in the RBA rates will push them up a bit further.
    fastbucks
    28th Jan 2016
    12:36pm
    It is about time super holders had a decent option instead of a volatile market. The cash rate offered by super funds is even way less that you can earn on a term deposit. Our super money should be in a safe investment, not in a market manipulated by the big guns.
    Greg
    28th Jan 2016
    1:56pm
    Like what though, higher returns will always mean higher risk.
    fastbucks
    28th Jan 2016
    2:24pm
    I mean somewhere where your principal doesn't go backwards at the whim of a market..
    Sceptic
    28th Jan 2016
    3:51pm
    Where your super is invested is in your hands. If you want it held in cash, tell the fund manager.
    Anonymous
    28th Jan 2016
    5:41pm
    pongping, as Cruiser said above, if you want a safe investment which will earn, opt for a cash option or term deposit. You certainly won't gain a great return, but it will not lose. It is YOUR money and YOU are the person who has the say WHERE it is invested and for HOW LONG. The interest rates are very small, but at least your investment is safe and you can sleep better at night. Safe usually means small return, less safe means "possibly" better return, even more less safe means "maybe" an even bigger return, etc, etc. If you are interested in a cash option or term deposit the "switching" to one is very simple and can be done with great ease and without having to pay a financial adviser/planner a fee or percentage for their "active" role. You can substantially reduce or totally cancel any fees or charges by making a financial adviser/planner take a "passive" role rather than an "active" one. Should you need advice from them in a passive role they would charge per hour rates (hefty ones, at that). I do my own investing in super, am no Paul Clitheroe, make a few dollars from cash and term deposits, pay no switching fees or admin charges to my super provider, and sleep well at night.
    I hope this has been a bit of help to you. Good luck.
    Mez
    1st Feb 2016
    11:56am
    You need to monitor your super fund online by changing the asset classes around in amounts invested according to the fund's performance figures there in order to gain positive figures instead of negative figures. This needs to be done online each month and you learn as you go.
    Adrianus
    29th Jan 2016
    11:19am
    pongping, I never hear posters mention any other asset class other than cash or shares/equities? Why is that I wonder?
    There are many other investments and one that springs to mind is unlisted Mortgage Trusts. They are a favourite with retirees because of their high yield and reasonable level of security.
    They have some risk attached as we saw when Rudd increased the Bank Deposit Guarantee, causing investor panic and a run on withdrawals. More than they could manage with their statutory liquidity so a moratorium on redemptions meant in some cases unit holders had to wait up to a couple of years.
    However they do produce a yield more than double term deposits?