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.