Archive for category: Lonsec Retirement Perspectives

Super funds once again delivered a boost to members in March with another month of investment gains. Leading superannuation research house SuperRatings estimates that the median balanced option generated a return of 1.9% for March. This takes the estimated return for the first 9 months of the financial year to 8.8%, making a double digit return a possibility depending on outcomes for the final quarter.

Super returns have proven resilient over the year so far with consistent positive performance driven by strong share markets both in Australia and internationally. “We have continued to see fund balances grow, despite ongoing uncertainty over the inflation outlook both here and abroad” commented Kirby Rappell, Executive Director of SuperRatings.

The median growth option gained an estimated 2.3% for the month, while the median capital stable option also rose by an estimated 1.1%.

Accumulation returns to 31 March 2024

	Monthly	FYTD	1 yr	3 yrs (p.a.)	5 yrs (p.a.)	7 yrs (p.a.)	10 yrs (p.a.)
SR50 Balanced (60-76) Index	1.9%	8.8%	11.2%	6.5%	6.9%	7.1%	7.3%
SR50 Capital Stable (20-40) Index	1.1%	5.4%	6.3%	3.3%	3.7%	4.0%	4.6%
SR50 Growth (77-90) Index	2.3%	10.5%	13.40%	7.7%	8.4%	8.4%	8.5%

Source: SuperRatings estimates

 

Pension returns also grew over March, with the median balanced pension option increasing by an estimated 2.2%. The median capital stable pension option is estimated to have grown by 1.2% over the month while the median growth pension option is estimated to increase by a 2.6% for the same period.

Pension returns to 31 March 2024

	Monthly	FYTD	1 yr	3 yrs (p.a.)	5 yrs (p.a.)	7 yrs (p.a.)	10 yrs (p.a.)
SR50 Balanced (60-76) Index	2.2%	9.9%	12.5%	7.0%	7.7%	7.8%	8.1%
SR50 Capital Stable (20-40) Index	1.2%	6.0%	7.1%	3.5%	4.0%	4.4%	5.1%
SR50 Growth (77-90) Index	2.6%	11.6%	15.0%	8.3%	9.2%	9.2%	9.4%

Source: SuperRatings estimates

Reflecting on Superannuation balances rebound since COVID

The following chart displays the change in the superannuation balance of a member who had $50,000 in their super account at the beginning of January 2020, before the COVID pandemic began to influence markets.

Assuming no additional contributions or deductions other than investment fees and taxes, a member who had $50,000 invested in the median balanced option at the beginning of 2020 would now have $64,406, while a member investing solely in an International Shares option would have $74,888 and a member who invested in cash would have a balance of $53,244. When measured from the depths of the COVID pandemic, the median international shares option within a super fund has returned 69% or 17% per annum since the lowest point of the pandemic, further highlighting the need for a long-term view on super.

While investing in international shares has provided the highest growth, what can also be seen is the additional uncertainty in account balance each month with the international share index displaying the largest ups and downs over the period.

“The COVID pandemic was a major event for financial markets around the world and while balances have recovered, we continue to see greater ups and downs in returns than prior to the pandemic” commented Mr Rappell. “With the benefit of hindsight, it is fair to say that we didn’t expect the strength of the returns experienced since the depths of the pandemic. With a decent chance of strong returns for financial year 2024, most members will be pleased to see their retirement savings growing, however the ups and downs are expected to remain, and we encourage members to focus on long term outcomes when reviewing their retirement settings”.

 

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We welcome media enquiries regarding our research or information held in our database. We are also able to provide commentary and customised tables or charts for your use.

 

For more information contact:

Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725
Kirby.Rappell@superratings.com.au

Expectations of peak inflation drove positive returns across most sectors of the market in November, leading to a bounce in returns following the subdued earnings reported between August and October. Leading research house SuperRatings estimates the median balanced option will deliver a return of 3.1% for the month of November.

“Despite the uncertainties around inflation, markets, and rates, we have seen funds recording strong returns into Christmas.” commented Kirby Rappell, Executive Director of SuperRatings.

The median growth option similarly experienced a strong month with an estimated 3.5% gain, while the median capital stable option experienced a more modest return of 2.0% owing to a lower exposure to shares.

Accumulation returns to November 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	3.1%	4.6%	5.3%	6.4%	6.5%	6.6%
SR50 Capital Stable (20-40) Index	2.0%	3.1%	2.2%	3.5%	3.7%	4.3%
SR50 Growth (77-90) Index	3.5%	5.3%	6.5%	7.7%	7.9%	7.8%

Source: SuperRatings estimates

November’s strong performance was also reflected in pension returns, with the median balanced pension option returning an estimated 3.4%. The median growth option is estimated to see a gain of 3.9% for the month, while the median capital stable pension option is estimated to deliver a 2.3% return.

Pension returns to November 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	3.4%	5.0%	5.8%	7.2%	7.5%	7.5%
SR50 Capital Stable (20-40) Index	2.3%	3.4%	2.7%	3.9%	4.1%	4.5%
SR50 Growth (77-90) Index	3.9%	6.0%	6.8%	8.5%	8.7%	8.6%

Source: SuperRatings estimates

The estimated gains in November are set to recover most of the losses over the last few months, setting up a modest, but positive, scene for most members as they approach the halfway point of the financial year. SuperRatings estimates the median fund will provide members with a 1.0% gain for the first 5 months of the financial year.

Despite modest returns over the second half of the year, funds are on track to deliver a 6.8% return after the first 11 months of the calendar year for the median balanced option. While the final result will be dependent on December performance, members are expected to see a reasonable positive return for calendar year, which may be similar to the estimated 6.4% p.a. for the median balanced option since 2000.

“We continue to believe that inflation will be a strong driver of markets in 2024, coupled with softening consumer demand; however, most members should remain reassured by super funds ability to navigate the range of market conditions we’ve seen over the past few years.” commented Mr Rappell. “December has been more mixed for shares so far, however there is still potential for a Santa rally in the second half of the month, and we encourage members to remain focused on their long-term outcomes.”

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We welcome media enquiries regarding our research or information held in our database. We are also able to provide commentary and customised tables or charts for your use.

For more information contact:

Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725
Kirby.Rappell@superratings.com.au

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.”

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We welcome media enquiries regarding our research or information held in our database. We are also able to provide commentary and customised tables or charts for your use.

For more information contact:

Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725
Kirby.Rappell@superratings.com.au

Markets continued their upward trajectory in April with leading superannuation research house SuperRatings estimating the median balanced option generated a return of 1.2% for the month, driven by continued momentum in Australian and global equities. However, inflation continues to sit well above central bank targets and the Reserve Bank of Australia defied expectations by increasing rates by another 25 basis points in their May meeting, again highlighting the ongoing challenge posed by inflation.

As we head towards the end of the financial year, funds look to be on track to deliver strong absolute returns with an estimated 8.1% return for a Balanced (60-76) option over the financial year to date.

The median growth option rose by an estimated 1.4% over April, while the median capital stable option rose by an estimated 0.7%.

Accumulation returns to April 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%	3.2%	8.3%	6.0%	7.0%	7.4%
SR50 Capital Stable (20-40) Index	0.7%	2.2%	3.7%	3.3%	4.0%	4.5%
SR50 Growth (77-90) Index	1.4%	3.6%	9.9%	7.0%	8.1%	8.6%

Source: SuperRatings estimates

Pension returns also improved over April with the median balanced pension option rising an estimated 1.3%. Similarly, the median growth pension option is estimated to rise by 1.6%, while the median capital stable pension option gained an estimated 0.7% over the month.

Pension returns to April 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%	3.4%	9.1%	6.5%	7.7%	8.0%
SR50 Capital Stable (20-40) Index	0.7%	2.3%	4.2%	3.6%	4.4%	4.9%
SR50 Growth (77-90) Index	1.6%	4.4%	11.0%	7.8%	9.0%	9.3%

Source: SuperRatings estimates

“The strong financial year to date return will be welcome news for members after last year’s losses as well as some bumpy months at the start of this financial year. However, these returns and latest inflation figures demonstrate the challenge facing super funds, the economy and everyday Australians. Inflation for the year to March sat at 7%. Most funds over the longer term are targeting a return of inflation plus 3% per annum for their members invested in the balanced option. Put simply, super funds are on track to return around 8% thus far this financial year, despite this also being behind an objective of inflation plus 3%. What it reinforces is that super remains a long term game and that returns are holding up pretty well, despite the challenges that funds and their members are facing to adapt to a higher inflation environment.”, commented Executive Director of SuperRatings, Kirby Rappell.

“We expect to see continuing volatility in returns, despite the strength with which volatility has been navigated to date. Setting long term strategy remains the best approach to long term success. While fund performance may struggle to significantly outpace inflation in the current environment, over the long term they continue to perform well.”

Release ends

We welcome media enquiries regarding our research or information held in our database. We are also able to provide commentary and customised tables or charts for your use.

For more information contact:

Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725
Kirby.Rappell@superratings.com.au