How Aussies could have saved retirement savings smashed by COVID-19

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The Australian superannuation sector has just experienced its worst quarter on record, and many Australians are wondering why trustees did not automatically de-risk in the lead-up to the COVID-19 crisis.

According to the Australian Prudential Regulation Authority (APRA), the coronavirus pandemic wiped, on average, 10.3 per cent from retirement savings account balances in the March quarter.

The sector’s total assets decreased by around 8 per cent – or $200 billion.

According to research by Russell Investments Australia, the average growth (balanced) fund dropped 9 per cent in the month to 31 March and 10.1 per cent for the March 2020 quarter.

This same report found that two-thirds of working Australians wrongly believed that super funds would automatically de-risk in the event of a market downturn.

“Our research shows choosing investments within super remains a minefield for many working Australians, leading to misinformed choices, or no choice at all,” said Russell Investments managing director Jodie Hampshire.

“This is particularly the case in times of severe market uncertainty, where strong emotions and behavioural biases have a heavy hand in decision-making.”

The survey of 3000 Australians revealed that 37 per cent of the respondents thought their fund would manage investments according to their personal circumstances, and that they did not have to advise how their super should be invested.

Sixty-seven per cent of those surveyed did not know how their super was invested or left it to their fund’s default approach.

“As an industry we can, and should, be doing more to help investors navigate this climate of increased uncertainty,” said Ms Hampshire.

“For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy.

“Therefore, having the right asset allocation at the right time is critical – members who don’t take on enough risk when they are able to could see their super balances stagnate while overly aggressive asset allocation at the wrong time can jeopardise a lifetime of savings.”

The survey also found that more than one in five weren’t aware that they could choose their investments in super; only 30 per cent believe they have enough investment experience to choose their own investments; and 28 per cent still choose their own investments, even though they know they don’t have much investment experience. 

One in four rely on help from a friend or relative with financial knowledge when making investment choices, and 30 per cent rely on information supplied by their super fund.

Australians who have made an active investment choice are much more likely to know how much super they want to save for (or spend in) retirement.

Ms Hampshire said that funds would do well to offer members more individual goals-based investment strategies to help them better manage their own investment choices through various market cycles.

“A key weakness of our current system is its inability to deliver investment strategies that address individual retirement goals. Super funds are serving up one-size-fits-many approaches to investing that might look sensible on average, but in the real world, nobody is average,” she said.

Introducing lifestyle or target date funds is a step in the right direction, says Ms Hampshire, but current strategies are still designed for individuals of a specific age, instead of delivering an optimal outcome for each and every individual.

“Our next challenge is to efficiently deliver an approach to asset allocation that is more personalised to an individual’s own retirement goal, and to their particular financial situation,” she said.

“Ultimately, we see that personalised, goal-based investing in super is the next big step to helping even more Australians achieve the retirement lifestyle they desire.”

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Estimates suggest damage to super won’t be as severe as GFC

Research house SuperRatings predicts a negative result for super this financial year.

Tax raid in store on super earnings?

Experts tell how government may seek to ease the financial burden of COVID-19.

Members urged to take long view on super as damage revealed

Super members are scrambling to check their account balances.

Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?



Total Comments: 13
  1. 0

    I did de-risk and am now having fun watching my super grow faster than it has ever done.

  2. 0

    Since the GFC shock in 2008 I lost faith in fund managers to respond quickly to economic threats. I regularly check my super account. Learning from the past, I dodged huge losses this time around.

  3. 0

    Why bother with a ‘shoulda, coulda, woulda’ nonsense?
    Way too late after the fact! And in my case, I have regained all but <3% of the loss and still rising.

  4. 0

    I suppose it’s OK to take a snapshot of super funds and then create an article around that but I believe that as we are almost 2 months past that last quarter reporting that it is misleading. Our fund has started moving positively once more and since December last our loss is 0.34%, hardly nowhere near the average loss reported of 10.3%. A downturn in the economy is usually only known once it starts which is too late to change just as the upturn is only known when it happens. This article can do nothing other than frighten people.

  5. 0

    I left mine in the diversified option and have so far lost 7%. I lost 10.7% at its lowest so I am crawling back to where I started.

  6. 0

    I lost about 11% but have recovered a bit, but the stupidity of our system is that if I lose a bit, I qualify for a part pension and end up way better off and with far less stress, having a regular secure income.

  7. 0

    Yes, I handle all my own switches and choose fund segments in light of previous month’s performance (which we’re told is no indication of future performance!). Initially dropped about 6%, but now recovered to 2.5% and risiing daily.

  8. 0

    Mine was purely luck in deciding I may want to access my super in the nxt couple of yrs so in Feb this year I changed about 80% of my super balance from Growth/Equity to Cap Stable (with only future contributions
    to go to Equity). I’m not much of a risk taker most of the time, so am happy I didn’t lose as much as some (about $15,000??) but I’m still not prepared to risk putting it back in higher growrh/risk options tho it doesn’t grow a lot at least it doesn’t lose a lot either. I may want to use this money when i finish working & am not going to be able to continue working shift work (earning reasonable income) much longer (59yo nxt month) so its important to me to hang on to what i do have even tho it’s insufficient it’s better than some



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