Superannuation members whose funds have been invested in Australian shares are collecting a windfall, thanks to the prolonged bull market.
This week, the benchmark ASX-200 index broke through the magic 6000-point mark, adding billions of dollars to the share prices of stocks on the Australian Securities Exchange.
SuperRatings Chief Executive Kirby Rappell told YourLifeChoices that analysts estimate the strong increase in prices characterised by a bull run began in February 2016.
“In the 19 months to the end of September, the ASX-200 had surged 26 per cent and since then it has galloped ahead another 300 points,” said Mr Rappell.
“If your superannuation is invested in a median balanced portfolio, it would be worth over 16.4 per cent more than it was at the start of the year.
“For instance, a starting super balance of $50,000 would have grown by $8200.”
Mr Rappell said most balanced options target returns of three per cent above the inflation rate over a 10-year period. However, as the Consumer Price Index has not risen beyond two per cent in the past couple of years, targeted returns are likely to be more subdued in the short term.
“If funds were returning on target, this would be approximately 7.5 per cent for the period,” he said.
“On a $50,000 account balance, this would be around $3750 a year, compared with a potential $8200 thanks to the buoyant share market.”
Broadly, if you are a man aged between 60 and 64 you can probably double these figures as the median super balance for that demographic is $100,000.
But there’s bad news for women in that age group as the median balance for them is just $28,000, according to the latest data (2013/14) from the Australian Institute of Superannuation Trustees. Thus the gains from a roaring share market this year will have added only around $4600 to these women’s nest eggs.
A more worrying statistic from a two-year-old study by the Association of Superannuation Funds of Australia found that 55 per cent of females aged 65 to 69 years reported having no superannuation.
This means that unless they have private investments, this group of women would not benefit from any share market surges, with their only prospect of keeping up with inflation being the indexation of Age Pensions.
But apart from this unfortunate cohort, Mr Rappell said “this has been a good year” for superannuation.
However, he warned that “double digit returns don’t go on forever”.
“Returns have had a pretty strong run lately, but over a 10-year period, you will also see returns that dip under a fund’s target.
“Superannuation investing is a long-term game and while people can enjoy the fact that today, the stock market is having a positive impact on their balances, they should by the same token not get too concerned if there is an occasional year when the returns are less than stellar.”
Is your superannuation investment performing well? Have you checked that your super is invested in a balanced portfolio that benefits from share market gains?