Equity markets remained strong over June with the superannuation industry closing out the year with returns that more than made up for last year’s losses. Leading superannuation research house SuperRatings estimates that the median balanced option returned 1.2% over the month of June, strengthening an already positive annual return to 8.5% for the year to 30 June 2023. This follows on from the -3.4% return last financial year, demonstrating the industry’s ongoing ability to navigate an uncertain market environment.
Executive Director of SuperRatings, Kirby Rappell said, “While there are significant conversations about interest rate rises, inflation and global uncertainty front and centre within the economy, it is reassuring to see superannuation funds’ ability to deliver a competitive outcome for everyday Australians.”
Mr Rappell continued “While economic pressures are hard to ignore, superannuation continues to perform well on a long-term basis with most funds managing to keep performance in line with the typical CPI+3.0% investment objective over 10 and 30 years. We expect funds may struggle to meet their inflation plus objectives over the short term, particularly as inflation remains elevated; however, super funds have done well to capitalise on the opportunities available to ensure members’ super account balances continue to grow. While the current cost of living is certainly putting pressure on many Australians, superannuation continues to play its part for people’s longer term financial outcomes.”
The median growth option returned an estimated 1.4% over the month, while capital stable options which hold more traditionally defensive assets such as cash and bonds returned 0.3%.
Accumulation returns to June 2023
| Monthly | 1 yr | 3 yrs (p.a.) |
5 yrs (p.a.) |
7 yrs (p.a.) |
10 yrs (p.a.) |
|
| SR50 Balanced (60-76) Index | 1.2% | 8.5% | 7.4% | 5.7% | 6.8% | 7.4% |
| SR50 Capital Stable (20-40) Index | 0.3% | 4.5% | 3.1% | 3.1% | 3.7% | 4.5% |
| SR50 Growth (77-90) Index | 1.4% | 11.1% | 9.0% | 6.8% | 8.2% | 8.7% |
Source: SuperRatings estimates
Pension returns also ended the financial year strongly, with the median balanced pension option up an estimated 1.3% over June. The median growth option rose by 1.6% while the median capital stable option is estimated to deliver a 0.3% return for the month.
Pension returns to June 2023
| Monthly | 1 yr | 3 yrs (p.a.) |
5 yrs (p.a.) |
7 yrs (p.a.) |
10 yrs (p.a.) |
|
| SR50 Balanced (60-76) Index | 1.3% | 9.8% | 8.2% | 6.4% | 7.7% | 8.3% |
| SR50 Capital Stable (20-40) Index | 0.3% | 5.1% | 3.7% | 3.5% | 4.2% | 5.1% |
| SR50 Growth (77-90) Index | 1.6% | 12.2% | 9.6% | 7.5% | 9.2% | 9.4% |
Source: SuperRatings estimates
Super Performance Continues to Exceed Targets
The chart below shows that the average annual return since the inception of the superannuation system is 7.1%, with the typical balanced fund exceeding its long-term return objective of CPI+3.0%.
This year international equities were the standout performers for super funds, with Australian equities and listed property also supporting the strong performance over the year. Unlisted assets, such as unlisted property, have placed a bit of a drag on returns, with a significant number of funds writing down unlisted valuations. These assets have performed well over the long term and provided crucial diversification within portfolios. More defensive options had a tougher year with smaller allocations to equities and a relatively subdued return from fixed interest, however cash options did provide a small silver lining as returns rose off the back of central bank rate rises.
We continue to emphasise the importance of setting a long-term strategy for your superannuation. Despite the strong performance over the past year, we suggest members remain alert, but not alarmed, and review their longer-term settings, such as whether they are in the most appropriate investment option for their situation and check their fees, when they check their annual statements.
Mr Rappell commented, “12 months ago, we did not anticipate an 8% return for this year and so, many people would see this as a positive. Further, long term returns remaining strong. However, we expect the ups and downs observed over the last 12 months to continue and members should be prepared for their balances to fluctuate. If you are not approaching or in retirement, keep in mind that all market movements in the short term are not likely to be what you are thinking about when you retire in 20 or 30 years time.”
Release ends
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For more information contact:
Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725
Kirby.Rappell@superratings.com.au
