The recovery in superannuation continued through August as funds posted their fifth consecutive month of gains amid signs of economic recovery in the September quarter.

Market stability and continued momentum in shares helped to bolster account balances in August. However, while consumers and investors are looking ahead to a ‘COVID normal’ world, the recovery is highly dependent on infection rates and the gradual easing of restrictions across the country.

According to estimates from leading superannuation research house SuperRatings, the median balanced option returned 1.8% in August, taking the financial year to date return to 2.9%. While super has so far performed strongly in the second half of 2020, members should be wary of further market volatility as the global pandemic rolls on.

“Australia has navigated the pandemic incredibly well compared to other countries, which has helped boost confidence locally,” said SuperRatings Executive Director Kirby Rappell. “Two key contributors are the relative success of Australian governments in managing the pandemic, and the stability that superannuation provides to our economy and financial system.”

“The theme for the second half of 2020 will hopefully be one of continued recovery, however this will likely be unevenly spread across markets and regions. The harsher lockdown conditions in Victoria will have a significant impact on long-term growth, and we expect more ups and downs in the market as the outlook evolves.”

According to SuperRatings’ data, the rolling 1-year return for the median balanced option moved back into positive territory, recording an estimated 0.8% to the end of August, but remains down 2.4% on the start of 2020. Both the growth and capital stable options are estimated to have gained 0.7% over the year to August.

Accumulation returns to end of August 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SR50 Growth (77-90) Index -3.0% 0.7% 6.4% 7.1% 7.8% 8.2%
SR50 Balanced (60-76) Index -2.4% 0.8% 5.9% 6.3% 7.1% 7.7%
SR50 Capital Stable (20-40) Index -0.4% 0.7% 3.8% 4.1% 4.7% 5.1%

Source: SuperRatings estimates

Pension returns have fared modestly better over the past year. The median balanced pension option is estimated to have risen 0.9% over the 12 months to August, while the growth option is estimated to have risen 1.0% and the capital stable option 0.9%.

Pension returns to end of August 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SRP50 Growth (77-90) Index -3.2% 1.0% 7.0% 7.9% 8.7% 9.1%
SRP50 Balanced (60-76) Index -2.4% 0.9% 6.3% 7.0% 7.7% 8.4%
SRP50 Capital Stable (20-40) Index -0.6% 0.9% 4.4% 4.6% 5.2% 5.7%

Source: SuperRatings estimates  

Taking a long-term view, super returns have done an incredible job at accumulating wealth for retirees over a period that includes two major financial and economic crises. According to SuperRatings’ data, since August 2005, a starting balance of $100,000 would now be worth $238,286 for members in a balanced option. For a growth option this would be $239,917. A member with full exposure to Australian shares would have seen their balance growth to $255,883. In contrast, returns on cash would have seen the balance grow to only $157,193.

Growth in $100,000 invested over 15 years to 31 August 2020

Source: SuperRatings estimates

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